Innovation-driven development

Transcription

1 Innovation-driven development - Invest Hangzhou: Information Technology kpmg.com/cn

2 c Invest Section Hangzhou: or Brochure Information name Technology

3 Invest Hangzhou: Information Technology 1 Content Preface 3 Industrial overview 5 Major industrial segments 8 Investment environment 14 About Hangzhou 20

4 2 Section or Brochure name

5 Invest Hangzhou: Information Technology 3 Preface This report aims to provide an overview of the investment climate in Hangzhou, Zhejiang province, for investors interested in China. Hangzhou, the capital city of Zhejiang province, was once regarded as the Best Zhou (an ancient Chinese administrative unit) in southeast China. As a pivotal city in the Yangtze River Delta, Hangzhou contributes towards the rapid growth of the economy. From 2005 to 2010, Hangzhou s gross domestic product ( GDP ) surged from RMB billion to RMB billion, representing a compound annual growth rate ( CAGR ) of 15.1%. The proportion of the tertiary industry also climbed from 44% to 49% over the period. The industrial structure of Hangzhou has evolved over recent years. The cultural and creative industry, financial services, e-commerce, software and IT services, Internet of things ( IOT ), and the tourist industry are becoming the key drivers of economic growth. The Information Technology ( IT ) industry has been expanding fast in Hangzhou. In 2010, revenue from major activities in the IT industry amounted to RMB billion, rising by 36% over the last year. Hangzhou plays a key role in China s IT industry. Hangzhou has won the recognition of the government and investors for its remarkable achievements in economic development. For six straight years from 2005 to 2010, Hangzhou has been rated by Forbes magazine as the best mainland city for doing business. In 2009, Hangzhou was ranked first in the World Bank s survey of investment climates in 120 Chinese cities. In 2010, Hangzhou was rated first in the China Institute of City Competitiveness rankings of the Top 10 Chinese Cities with the Best Investment Environment. In a fast-changing market like China, various enterprises and industries may find themselves in different situations. It is recommended that investors who are operating or planning to operate in China should seek the latest information and specific advice from experienced professional consultants, and conduct due diligence when appropriate. This report aims to provide information about the investment climate in Hangzhou through our independent analysis of publicly available information. It should not be used as a substitute for adequate due diligence before any investment. Sources of information are indicated in the report. We would like to thank the Hangzhou Municipal Foreign Trade and Economic Cooperation Bureau for its kind assistance. This report adopts an exchange rate of USD 1 = RMB 6.57 (based on the Bank of China s benchmark rate on 14 March 2011), and includes data up to March Sources: Hangzhou National Economic and Social Development Report 2010 ; hzstats.gov.cn; Hangzhou Municipal Information Office; China Daily website ( Zhejiang Online ( cn/05sn/system/2011/01/24/ shtml); chinacity.org.cn (

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7 Invest Hangzhou: Information Technology 5 Industrial overview Scale and industrial structure Foreign investments In 2010, revenue from major activities in the IT industry amounted to RMB billion, rising by 36% over the last year. According to an article on the China Daily website, Hangzhou is the only city in China that is the base for the national IT industry, national software industry, national integrated circuit design industry, services outsourcing industry and high-tech industry at the same time.

8 6 Invest Hangzhou: Information Technology Scale and industrial structure Scale The IT industry in Hangzhou includes e-commerce, software and IT services, and Internet of things ( IOT ), as well as sectors such as integrated circuit design, digital TV, communications, etc. In 2010, revenue from major activities in the IT industry amounted to RMB billion, rising by 36% over the last year, and achieving a CAGR of 10.2% from 2006 to In 2010, there were approximately 2,000 IT enterprises with a headcount of about 165,000, which is 12,000 more than that in Industrial structure Software and IT services, IOT and e-commerce are the major sectors driving the development of the IT industry in Hangzhou. In 2010, the revenue from major activities of each of these sectors accounted for 62.4%, 15.6% and 5.7% respectively of the IT industry as a whole. RMB 100 million Revenue from major activities in the IT industry, ,500 2,000 1,500 1, e-commerce 5.7% IOT 15.6% 1,306 1,457 1,432 1,417 1, IT industrial structure, 2010 Others 16.3% Software and IT services 62.4% Sources: Hangzhou Municipal Information Office; cena.com.cn, 2008

9 Invest Hangzhou: Information Technology 7 Foreign investments Increasing influx of foreign investments into Hangzhou, especially in the software and IT services industry In 2010, the Hangzhou Municipal Government approved the establishment of 545 enterprises with foreign investments, channeling capital of USD 4.36 billion. The CAGR of total foreign investments from 2005 to 2010 was 20.5%. For the first six months of 2010, newly contracted foreign investments in Hangzhou s services industry amounted to USD 2.01 billion, of which USD 1.38 billion was attributed to emerging industries such as information transmission, computer services and software development. Software and IT services play a significant role in foreign invested industries. In the first six months of 2010, 53.6% of the operating revenue from the IT industry as a whole was contributed by enterprises with foreign investments and investments from Hong Kong, Macau and Taiwan, up 21.0% year-onyear, and 3.8 percentage points higher than that from the industry as a whole. Almost all e-commerce and IOT industries in Hangzhou are invested with domestic private capital Breakdown of operating revenue from the software and IT services industry for the first six months of 2010 Operating revenue from domestic enterprises 46.4% Operating revenue from enterprises with foreign investments and investments from Hong Kong, Macau and Taiwan Sources: hzstats.gov.cn; Development Plan of Internet of Things Development in Hangzhou in ; smejs.gov.cn, 2011; xiashanet.com/ (

10 Major industrial segments Software and IT services Internet of things e-commerce Key areas of development The software and IT services industry, IOT and e-commerce are developing rapidly in Hangzhou, and play a key role in China s IT industry. They are three of the Top 10 key emerging industries that Hangzhou supports under the 12th Five-year Plan.

11 Invest Hangzhou: Information Technology 9 Software and IT services Hangzhou is one of the most important bases of the software industry in China. The software and IT services industry records an annual income of RMB billion In 2010, the software and IT services industry recorded operating revenue of RMB billion, representing a year-on-year growth rate of 32% and a CAGR of 21% over the last five years. The revenue from major activities in 2015 is targeted at RMB 150 billion. As at the end of 2010, there were 984 officially approved software enterprises, 143 more than the number in Among the software enterprises, 27 were listed and 11 were named in China s Top 100 Software Companies for As at the end of 2010, the headcount of Hangzhou s software and IT services sector was about 98,000, nearly 59,000 more than the number in Currently there are more than 20 large software industrial parks scattered in various districts of Hangzhou, each measuring more than 10,000 square metres. 1 Robust market demands Key drivers of software and IT services development in Hangzhou Hangzhou is located in the Yangtze River Delta where GDP reached nearly RMB 7 trillion, accounting for 17.6% of the national total. There is a strong demand for software and IT services from more than 2 million enterprises in the Yangtze River Delta. 2 Cluster effect of software enterprises Software enterprises can form conglomerates to accept large orders. Large software enterprises can subcontract these orders to small software enterprises Adequate human and technological resources There are about 100,000 new college graduates from Hangzhou each year. Hangzhou has a talent pool of over 1.22 million people. There are 637 research and development centres, as well as 501 corporate technology centres. 6 Government s support for the industry Initiate and guide various forms of financial support. Outsource more government information projects. Build more industrial parks. Issue more policies to attract skilled people and to encourage training and business start-up. 6 Key drivers Improving investment and financing environment In 2009, Science and Technology Bank was established in Hangzhou which specializes in serving technology enterprises. Hangzhou has abundant private capital and 297 venture capital institutions 3 4 Well-protected intellectual property rights In 2007, Hangzhou became the first model city for intellectual property rights protection in China. In 2009, Hangzhou issued regulations on intellectual property rights protection in the outsourcing service industry. In 2010, the Gaoxin (Bin-jiang) District in Hangzhou became the first industrial park nationally to pilot implementing intellectual property rights. Sources: Hangzhou Municipal Information Office; Zhejiang Economic and Information Technology Commission website; Hangzhou Municipal Government website; Three-Year Action Plan for the Restructuring and Promotion of Electronics and Information Industries in Hangzhou from 2009 to 2011

12 10 Invest Hangzhou: Information Technology Internet of things ( IOT ) Currently, the annual output of the IOT industry in Hangzhou is about RMB 30 billion, and it will surge to over RMB 100 billion by 2015 In 2010, the annual output of the IOT industry in Hangzhou was about RMB 30 billion, nearly 15% of the total output of the IOT industry in China as a whole. The output of the industry in 2012 and 2015 are targeted at RMB 50 billion and RMB 100 billion respectively. As at the end of 2010, there were more than 100 IOT enterprises in Hangzhou, forming an integral industry chain. IOT industry chain in Hangzhou Upstream Midstream Downstream Chip design and development Transducers/Terminal devices manufacturing System solutions and integration IOT application and operation Solid foundation for the industry There is a solid foundation for the development of software, communications, e- Commerce, integrated circuit TV and digital TV in Hangzhou. Key drivers of IOT development in Hangzhou Integral industry Rich technological chain led by large reserve enterprises As at the end of 2009, IOT There are five listed enterprises in Hangzhou had companies and over 100 more than 160 relevant IOT enterprises in patents and software Hangzhou, forming an proprietary rights, 56 of which integral industry chain. were invention patents. Support from the Hangzhou Government Initiate and guide various forms of financial support. Build more industrial parks. Promote the application of IOT technologies in Hangzhou s industries and daily life. 4 Wide applications in industries Implement smart grids, energy efficiency and emission reduction, security monitoring, environmental monitoring, intelligent medical care, etc. 5 Sound network infrastructure in Hangzhou 6 Equipped with an advanced communication network, that makes use of various technologies such as large capacity program control exchange, as well as optical, digital, satellite, wireless and 3G communication networks. Sources: Hangzhou Municipal Information Office; Development Plan of the IOT Industry in Hangzhou ( ) ; Output of the IOT industry in Hangzhou may exceed RMB 30 billion in 2010 (

13 Invest Hangzhou: Information Technology 11 e-commerce Hangzhou is the only Capital of e-commerce in China, and nearly 55% of the total revenue from e-commerce corporate services in China is contributed by Hangzhou In 2010, revenue from e-commerce corporate services in Hangzhou amounted to RMB 11 billion, representing a year-on-year increase of 57% and nearly 55% of the total revenue from e-commerce corporate services in China. The revenue in 2015 is targeted at RMB 100 billion. As at the end of 2010, there were over 1,300 B2B and B2C e-commerce websites in Hangzhou, more than one-fifth of the national total. Alibaba.com and taobao.com are the B2B and B2C websites recording the highest sales in China respectively. In 2010, e-commerce coverage for enterprises in Hangzhou was about 50%, higher than the national average of 40%. In 2009, e-commerce retail sales to individual customers in Hangzhou accounted for 5% to 6% of the total retail sales in Hangzhou, more than three times the national average of 1.8%. 1 Robust market demands Hangzhou is located in the prosperous Yangtze River Delta where the GDP reached about RMB 7 trillion, accounting for 17.6% of the national total. There is strong demand for e-commerce from over two million enterprises in the Yangtze River Delta. 46 Key drivers of e-commerce development in Hangzhou Cluster effect of enterprises 2 Key drivers Improving e-commerce support systems in Hangzhou Building an e-commerce integrity system since Building an e-commerce payment platform since Building a talent pool for e-commerce since One-third of Internet companies in China are in Hangzhou. Leading enterprises such as alibaba.com and taobao.com provide a platform for the business development of small and medium e-commerce enterprises Support from the Hangzhou Government Allocate funds in support of the use of e-commerce by enterprises. Issue tax credit policies for the e-commerce industry. Allocate funds in support of research and development, as well as reward leading enterprises in e-commerce application. Plan for the establishment of the first e- Commerce university in China. Sources: Hangzhou Municipal Information Office; Test Report on 2010 e-commerce Market Data in China, China e-business Research Center ; sohu.com ( Zhejiang Economic and Information Technology Commission website

14 12 Invest Hangzhou: Information Technology Key areas of development Key areas of IOT development: 1. Pilot and demonstrate smart city: Initiate intelligent transport system, intelligent urban and rural administration, intelligent public security, intelligent travel, energy efficiency and intelligent buildings. 2. Pilot and demonstrate intelligent living: Be the innovators in intelligent homes, intelligent communities and intelligent medical care. 3. Pilot and demonstrate intelligence convergence: Use smart grids, intelligent production and logistics, safe production, energy saving and emission reduction, and food safety tracking. 4. Pilot and demonstrate intelligent environment monitoring: Implement urban water environment monitoring, atmosphere monitoring, underground tube net monitoring and forest ecological safety monitoring. Key areas of e-commerce development: 1. Wider application Apply e-commerce in enterprises, communities, rural areas and government agencies. 2. Service enhancement Attract and develop more enterprises to engage in e-commerce and to encourage online trading, business start-up and employment. 3. Technological upgrade and innovation Develop broadband wireless mobile communication, next generation network, network and information security, wireless video identification, online payment, supply chain management, system integration, etc. 4. A sound support system Continuously improve the network infrastructure, and strengthen the logistics support system, standard system, credit system and payment system. Software and IT services Key areas of software and IT services development: 1. IT and industry convergence: Promote and expedite the use of computer-aided manufacturing applications and information systems in industries, and encourage wider application of the IT system in various processes and e-commerce in product circulation. 2. Strengthen advantageous software industries such as corporate applications software and communication software, and develop embedded software, network software and video game software. 3. Encourage the outsourcing of software and information services to enhance the global exposure of the software industry. Sources: (1)Development Plan of Hangzhou s IOT Industry ( ) (2)Development Report on Hangzhou s Software and Information Services Industry, 2009 (3)Development Plan of Hangzhou s Cultural and Creative Industry ( )

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16 14 Invest Hangzhou: Information Technology Investment environment Auxiliary industrial parks Investment policies Hangzhou s strengths Comments from investors Case study Hangzhou has created a positive investment environment by setting up over 20 auxiliary industrial parks for e-commerce, software and IT services, and IOT industries, and by issuing a series of supporting policies.

17 Invest Hangzhou: Information Technology 15 Auxiliary industrial parks Major IT industrial parks in Hangzhou Name of industrial parks Core industries Floor area (in square meters) Number of enterprises in the park Location Hangzhou Central Software Park Software 9,100 Over 80 Shangcheng District Xiacheng Xinghuo e-commerce Park Hangzhou East e-commerce Park e-commerce, 200, Xiacheng District Software e-commerce 170,000 Over 120 Jianggan District Hangzhou North Software Park Software 500, Gongshu District Hangzhou West Software Park Software 1 million Over 50 Xihu District Hangzhou Digital Entertainment Software 83, Xihu District Park Ego Software Park (Ego Software 130,000 Over 700 Xihu District Innovation Park) Changdi Software Park Software 49,000 Over 120 Xihu District Gaoxin District Animation Software, cartoon 50,000 Over 40 Gaoxin District Software Park and animation Hangzhou East Software Park Software Nearly 500,000 Over 330 Wenjiao District, Jiangbei District Insigma Software Park Software 460, Xihu District Ascendas Software Park Software 800,000 Over 20 Hangzhou Economic and Technological Development Area Hangzhou South Software Park Software 155, Xiaoshan District Hangzhou Audio and Video Software Park Yuhang Innovation Zone Software Park Gaoxin District (Binjiang) IOT Industrial Park Software Under Construction - Xiaoshan District Software, creativity, 50,000 Over 50 Yuhang District electronic and information IOT 2.8 million Over 100 Gaoxin District Sources: Hangzhou launches the first 17 special software parks, Hangzhou District Government Offices websites; ssfcn.com ( Hangzhou Daily website

18 16 Invest Hangzhou: Information Technology Investment policies Major investment policies for the IT industry issued by the Hangzhou Municipal Government in recent years Year Policies and their content Directory of the Way of Development for Hangzhou s IT Industry 2010 Details the key areas of the IT industry s development, which is an important basis for the application and the Municipal Government s approval of special funds for the development of the IT services industry. Certain Opinions from the Hangzhou Municipal Government on the Further Promotion of the Information Services Industry Financial support for the IT industry Development Plan of Internet of Things Development in Hangzhou in Five-year plan for the IOT industry Administrative Measures on a Special Fund for the Development of the Information Services Industry in Hangzhou (Trial) Financial support for the IT industry Three-Year Action Plan for the Restructuring and Promotion of the Electronic and Information Industries in Hangzhou from 2009 to 2011 Three-year plan for the electronics and information industries Reply from the Hangzhou Municipal Government on the Resolution of Issues Relating to Returned Overseas Students Support and incentives for returned overseas students in terms of business start-up, employment and living conditions Guiding Opinions on the Implementation of a Business Start-up Training Program for Ten Thousand College Students in Hangzhou Financial support for the training of college students Assessment Methods for Enterprises Filing under the Information Port Project in Hangzhou Further clarify the assessment standards and reward those enterprises with outstanding performance Standards created in 2004 to determine rewards Sources: Hangzhou Municipal Information Office; Hangzhou Municipal Foreign Trade and Economic Cooperation Bureau website; hangzhouit. gov.cn

19 Invest Hangzhou: Information Technology 17 Hangzhou s strengths Hangzhou enjoys advantages over neighbouring cities in terms of its skilled people, the cluster effect of enterprises, and its IT infrastructure 1 The number of new graduates from colleges and universities in 2010 Total number of officially approved software enterprises in ,000 people Hangzhou 杭 州 <5 Maximum 周 边 城 市 number 最 大 值 in neighboring cities Number of enterprises Hangzhou 杭 州 <500 Maximum 周 边 城 市 number 最 大 值 in neighboring cities Internet export bandwidth in 2010 Gigabytes Hangzhou 杭 州 600 Suzhou 苏 州 <280 Maximum bandwidth in neighboring cities Total number of users with broadband Internet access in ,000 households Hangzhou 杭 州 Suzhou 苏 州 <140 Maximum number in neighboring cities Hangzhou has continuously enhanced its investment environment and services to strengthen its competitiveness Measures for strengthening Hangzhou s competitiveness Major areas Living costs such as housing International services Current situation The housing prices in Hangzhou are in the upper tier in China. Institutions specifically serving foreigners are increasing. Measures for improvement and enhancement implemented by Hangzhou Various policies were implemented between 2008 and 2010 to expedite the establishment of a housing security mechanism for talented people Foreign teachers at primary and secondary schools, as well as overseas educational institutes are being introduced to enhance the level of international schools. International medical professionals are brought in to enhance the standard of the medical and auxiliary services for the benefit of foreigners. Note: 1Neighbouring cities refers to other cities in the Yangtze River Delta, excluding Shanghai and Nanjing. Sources: Hangzhou Municipal Information Office; Jiangsu Economic and Information Technology Commission website; Wuxi Municipal Bureau of Information and Radio website ; Suzhou Economic and Information Technology Commission website; Ningbo Information Industry Bureau website; China Daily (

20 18 Invest Hangzhou: Information Technology Comments from investors Hangzhou has improved its environment and quality of life in recent years. --- Motorola (China) Technologies Limited, Hangzhou branch Hangzhou continuously improves its infrastructure by upgrading its railways, high-speed railways and highways. The transportation network is well-developed. ---Hangzhou Bianfeng Networking Co., Ltd. Hangzhou has a solid foundation and large talent pool for industrial development, and this is one of the major reasons we invested in Hangzhou. ---NetEase (Hangzhou) Network Technology Co., Ltd. Leading IT enterprises in Hangzhou Japan and Korea NEC (Japan) Samsung (Korea) Fuji Heavy Industries (Japan) Mitsubishi (Japan) Toshiba (Japan) Europe and the US Ericsson (Sweden) Alcatel Alsthom (France) Scanfil (Finland) Strategic Systems Solutions (UK) Motorola (US) IBM (US) State Street (US) Yahoo (US) WebEx (US) Noez Work (US) ArcSoft (US) ASK (US) Others VIA (Taiwan) China Mobile NetEase Shanda Interactive Entertainment Sources: KPMG interview; KPMG analysis

21 Invest Hangzhou: Information Technology 19 Case study Insigma Technology Company Limited ( Insigma ) Background Established in 2001, Insigma has its headquarter in Hangzhou and presences in Beijing, Wuxi, Shenyang, Dalian, Tokyo and New York. It has a registered capital of RMB 813 million. Insigma mainly provides services related to network equipment and terminals, as well as IT system integration and software outsourcing services (mainly for US and Japanese clients). The company has developed extensive partnerships with technology giants such as Microsoft, IBM and Cisco. Tremendous growth As a leader in China s outsourcing industry, Insigma is ranked by the International Association of Outsourcing Professionals as one of the Top 50 World s Best Outsourcing Service Providers. It is ranked second in China s Top 20 Enterprises in Software Outsourcing and is one of the 2010 Top 10 Hangzhou Offshore Outsourcing and Export Enterprises. In 2009, Insigma s software park was put into use, This park is recognized as one of the first model software parks for outsourcing and advanced software industries in Hangzhou. In 2010, Insigma s revenue is estimated to be around 5.8 billion, representing a 18% growth over Why invest in Hangzhou? -- The Hangzhou Government has been innovative and proactive in promoting the IT industry and in creating a conducive environment for growth, for example the Hangzhou Government s promoted local investments and enterprises in the US Global Outsourcing Conference. We have gained publicity and a platform to develop. - Interview with the Management of Insigma A large talent pool in Hangzhou: -- Hangzhou has a huge talent pool, and the cooperation between IT academia and enterprises is especially effective in raising the standard of labour skills. - Interview with the Management of Insigma Composition of Insigma s revenue in the first six months of 2010 Network equipment and terminals 82.2% IT system integration, software outsourcing services 17.8% Full support from the Hangzhou Government: Source: Interview with the management of Insigma, Insigma s corporate website, and Insigma s interim report for the first six months of 2010

22 20 Invest Hangzhou: Information Technology About Hangzhou Overview Economic development Industrial structure Scientific research, education and cultural environment Contact list

23 Invest Hangzhou: Information Technology 21 Overview Hangzhou is advantageously located and has a rich historical and cultural heritage Hangzhou, the capital city of Zhejiang province, is located in the north of China s southeast coast. As the economic, transportation and cultural hub of the southern wing of the Yangtze River Delta (YRD), Hangzhou ranks second in terms of economic prosperity in the YRD. As one of the cradles of Chinese culture and one of China s seven ancient capitals, Hangzhou was once referred to by Marco Polo as the most beautiful and elegant city in the world. Hangzhou covers a total area of 16,596 square kilometres. Under the jurisdiction of Hangzhou are the eight districts of Shangcheng, Xiacheng, Jianggan, Gongshu, Xihu, Binjiang, Xiaoshan and Yuhang; the three county-level cities of Jiande, Fuyang and Lin an; and the two counties of Tonglu and Chun an. As at the end of 2010, the registered population in Hangzhou was about 6,891,200. As a transportation hub in southeast China, Hangzhou is equipped with a well-developed transportation infrastructure Hangzhou is conveniently connected with a network of railways and expressways. Major railway routes include the Shanghai-Hangzhou high-speed railway, Ningbo-Hangzhou high-speed railway, Xuancheng-Hangzhou railway, Hangzhou-Ningbo railway and Shanghai-Kunming railway. Major highway routes include the Shanghai-Hangzhou-Ningbo expressway, Hangzhou-Pudong expressway, Hangzhou-Jinhua-Quzhou expressway, Hangzhou-Huizhou expressway and Hangzhou-Nanjing expressway, and 11 national and provincial highways have their centres in Hangzhou. The Hangzhou Xiaoshan International Airport, 27 kilometres away from downtown Hangzhou, serves 160 routes, including 30 international flights to Tokyo, Osaka, Pusan, Singapore, Hong Kong, Macau and Taiwan. In 2010, the airport recorded 17,068,600 passenger departures and arrivals, representing a 14.2% growth over Hangzhou s location in China Beijing Shanghai Hangzhou Hong Kong Sources: Hangzhou Municipal Government website; Hangzhou Urban Planning Bureau website; Hangzhou National Economic and Social Development Report 2010; Hangzhou Statistical Yearbook 2010

24 22 Invest Hangzhou: Information Technology Economic development Hangzhou is highly competitive and has rapid economic development In 2010, Hangzhou s GDP amounted to RMB billion, up 17% year-on-year. The CAGR of Hangzhou s GDP from 2005 to 2010 was 15.1%. In 2010, Hangzhou s annual value of imports and exports totalled RMB billion (USD billion), growing by 30% over 2009, of which imports amounted to RMB billion and exports to RMB billion. Hangzhou offers a consumer market with huge potential Disposable income for residents is growing steadily. In 2010, Hangzhou s per capita disposable income for urban residents reached RMB 30,035, up 12% year-on-year, and exceeded the national average by 57.2%. In 2010, the consumer market continued to grow. Hangzhou s total retail sales of consumer goods increased year-on-year by 19% to RMB billion. GDP of Hangzhou, CAGR: 15.1% Hangzhou versus national per capita disposable income, Hangzhou CAGR: 12.6% RMB 100 million 8,000 6,000 4,000 2, ,946 4,789 5,088 4,104 3,444 2, RMB 40,000 30,000 20,000 10, Hangzhou China

25 Invest Hangzhou: Information Technology 23 Industrial structure Evolution of Hangzhou s industrial structure Hangzhou has focused on the secondary and tertiary industries while developing the economy. These two industries have accounted for more than 95% of Hangzhou s GDP for the last five years. The tertiary industry has recently been gaining pace in Hangzhou. In 2010, the output value of the tertiary industry totalled approximately RMB billion, and the CAGR of the tertiary industry s output value from 2005 to 2010 was 17.4%. Breakdown of Hangzhou s GDP in 2010 Tertiary Tertiary industry industry 49% 49% Primary Primary industry industry 3% 3% Secondary Secondary industry 48% industry 48% Foreign direct investment (FDI) as the driving force of Hangzhou s economic growth In 2010, FDI in Hangzhou jumped by 8.5% yearon-year to RMB billion (USD 4.36 billion) in total. The CAGR of FDI from 2005 to 2010 was 20.5%. As at the end of 2010, the number of enterprises in Hangzhou with FDI over USD 10 million grew to 2,203, of which 82 are Global 500 companies, including GE, IBM, Siemens and Ericsson. During the 11th Five-year Plan period, Hangzhou attracted 91 investments each valued at over USD 50 million, 429 investments valued at over USD 30 million each and 1,538 investments valued at over USD 10 million each. RMB 100 million RMB 100 million Foreign direct investment, CAGR: 20.5% CAGR: 20.5% Sources: Hangzhou Municipal Foreign Trade and Economic Cooperation Bureau; Hangzhou National Economic and Social Development Report 2010; Hangzhou Statistical Yearbook 2010; Hangzhou Gaining Momentum for Economic Transformation, Zhejiang Daily, January 2011

26 24 Invest Hangzhou: Information Technology Scientific research, education and cultural environment Hangzhou s strong capability for scientific research and high standard of education Hangzhou encourages corporate investment in scientific research and the founding of research institutes. In 2009, the proportion of Hangzhou s total investment in research and development over GDP was 2.6%, higher than the national average of 1.7%. A total of 26,075 patent applications were submitted and 15,507 were authorized, ranking Hangzhou first among all provincial capitals. There are 38 general colleges and universities, 317 senior and junior secondary schools, as well as 37 vocational training schools in Hangzhou. Major universities include the Zhejiang University, the Hangzhou Dianzi University and the Zhejiang University of Technology. In 2009, there were approximately 107,000 new graduates from colleges and universities in Hangzhou, of which 17.8% were recruited by the IT industry, followed by the service industry, and other industries. Hangzhou International School is the first school in Zhejiang province that caters to the children of foreign nationals, including those from Hong Kong, Taiwan and Macau. It is an American-style school with English as the medium of instruction, and offers a curriculum from pre-school to twelfth grade. Pleasant weather with four distinct seasons Hangzhou has a subtropical monsoon climate with an average annual temperature of 16.2 and annual rainfall of 1,469 millimeters. As at the end of 2010, Hangzhou had a greenery coverage rate of 40% and urban per capita green space of square metres. In 2009, Hangzhou was voted the Happiest City in China. Hangzhou has also received awards for National Advanced City Landscaping, National Garden City, National Excellent City in Comprehensive Improvement of Urban Environment, China Habitat Environment Prize, National Model City of Environmental Protection and China Outstanding Tourist City. Employment of Hangzhou graduates by industry, 2009 IT industry 17.8% Service industry 7.7% Others 74.5% Sources: Hangzhou Municipal Government website; Hangzhou National Economic and Social Development Report 2010; Development of Service Industries in Hangzhou 2009 and Ideas and Keys of the Development of Service Industries in Hangzhou 2010 ; hzstats.gov.cn; hzsk.com

27 Invest Hangzhou: Information Technology 25 Contact List Hangzhou Municipal Foreign Trade and Economic Cooperation Bureau 457 Yan an Road, Hangzhou Telephone: +86 (571) Fax: +86 (571) Website: Hangzhou Municipal Centre of International Investment Promotion Telephone: +86 (571) Fax: +86 (571) Hangzhou Municipal Development and Reform Commission 318 North Huancheng Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal Construction Commission 9 Changsheng Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal Information Office 318 North Huancheng Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal Science and Technology Bureau Hangzhou Science & Technology Tower, 2 Huixing Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal Administration of Industry and Commerce 109 Fengqi East Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal Land and Resources Bureau 359 Wensan Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal State Taxation Bureau 276 South Jianguo Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Local Taxation Bureau 152 Zhonghe Middle Road, Hangzhou Telephone: +86 (571) Website: Hangzhou Municipal Bureau of Labor and Social Security 242 Zhonghe Middle Road, Hangzhou Telephone: +86 (571) Website:

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