All the way with shining Shenyang

Forget talk of 'the rust belt'. Automotive companies are finding that the city of Shenyang is offering them opportunities they can find nowhere else

Tell any high-flying European business executive that he or she is about to be posted to the Far East, and the next question may well be: "Am I being sent to Beijing, Hong Kong, Shanghai or Tokyo?"

So when you gently tell them that they are being dispatched to Shenyang, in China's Northeast, it may be no surprise if there is no sudden dash for the door to start packing.

Leaving aside the small problem of bitterly cold winters - temperatures below -10 C are the norm in many places - the industrial Northeast is not exactly what you would call glamorous economically. In fact, recent growth figures have only served to reinforce the region's status as China's star non-performer, and that point is driven home by the frequent, unabashed references to the area as the country's "rust belt".

All the more surprising then when a German businessman looks past all that not only to heap praise on Shenyang, capital of Liaoning province, but says it is "the only place to be" for his company.

Max Menzel recently arrived in the city after being appointed general manager of DB Schenker Jinbei Logistics (Shenyang) Co Ltd, a joint venture set up by DB Schenker , the international transport and logistics arm of Germany's national railway, Deutsche Bahn, and Brilliance Jinbei.

"Shenyang has strong roots in the car industry," he says. "Transport is also good, labor resources are plentiful, there are complete automotive industry chains and the living conditions aren't bad, either.

"All these things point to it being a good place not only for carmakers but also automotive industry players like us."

DB Schenker was an early comer to China, having entered the country in 1979 as the country's opening-up policies were in their very early stages.

The company now has a network of more than 60 offices and 85 warehouses covering 950,000 square meters throughout the country.

Last year it ran 250 container trains between Shenyang and Europe, after having run its first eastbound service from Leipzig to Shenyang in 2011.

"Our Shenyang operations are vital for DB Schenker as we expand globally, and we plan to set up a joint venture with Shenyang Jinbei Automotive Co Ltd to further tap into the market," Menzel says.

Guan Yang, manager of DB Schenker Shenyang branch, says the venture between DB Schenker and Brilliance Jinbei, whose major activity is providing automotive-logistics services, will be the German company's most important project in the past 10 years.

"We are confident about growth in Shenyang's car industry. DB Schenker and Jinbei will have an even split of the shares, and a total of 20 million euros will be put into it," Guan says.

"In fact the fast growth in DB Schenker's operations in Shenyang reflects that of the city's automotive industry as a whole."

In the 12 years since DB Schenker set up shop in Shenyang, growth in its annual revenue has been in the doube digits, Guan says. The branch employs 23 people.

Shenyang, once the imperial seat of the Qing Dynasty (1644-1911), then the manufacturing king of emerging China, is now going into overdrive to raise global awareness of itself as a kind of Motown or Wolfsburg of the East.

The idea is not that far-fetched when you consider that it already plays host to large manufacturing operations of foreign car brands such as BMW, General Motors and the Chinese carmaker Shenyang Brilliance Auto.

The city's pretensions to automotive manufactuing leadership began to attain critical mass the year DB Schenker arrived, 2003, when BMW set up the BMW Brilliance Automotive joint venture there to produce and distribute its vehicles in China.

Last year 1.1 million vehicles were produced in the city, generating revenue of 221.8 billion yuan ($35.7 billion, 32.6 billion euros), 14.3 percent more than the year before.

The city's GDP was about 710 billion yuan, 6 percent higher than the year before. The automotive industry is reckoned to account for about 31 percent of that.

The Chinese Association of Automobile Manufacturers says 23.5 million vehicles were sold in the country last year and that this will rise to about 25 million, an increase of 7 percent, this year.

As promising as those figures may seem, there is a darker side to the story, the association says, because even though the country will have enough capacity to turn out 40 million vehicles this year, at least one-third of its motor vehicle assembly lines will be idle.

Zheng Ce, director of the BMW Auto Industrial Zone Investment Promotion Bureau in Shenyang, is unfazed by those figures, saying they do not affect the city.

"I have watched Shenyang's car industry grow and can see how far BMW's influence has spread. It really is reshaping and revitalizing Shenyang. In this city the car industry is mainly high-end vehicles, and the downturn in the industry nationwide really has had no impact here."

Another barometer of how well the automotive industry is doing in the city is the Shenyang-European Union Economic Development Zone, a 20-minute drive northeast of the city center.

Located in the zone, covering 70 square km, are four automakers - Brilliance Jinbei, Brilliance Zhonghua, Brilliance BMW and Shanghai GM (Shenyang) Norsom Motors - and 150 automotive parts suppliers.

The zone had turnover of 130 billion yuan last year, 7. 6 percent higher than the year before, producing 829,000 vehicles, 1.7 percent more than the year before. The car industry generated revenue of 112.3 billion yuan, 6.3 percent higher than the year before, and nearly three-quarters of the city's motor vehicle sales were from the zone.

Li Qin, director of the general office of Shenyang-European Union Economic Development Zone, the only designated EU development zone in China, says the car industry is a pillar industry for the city.

"By 2020, 1.6 million vehicles are expected to be produced in the zone, generating revenue of 300 billion yuan. By the same year the motor vehicle industry will contribute taxation of 80 billion yuan a year, and keep about 160,000 people employed."

By the end of this year, investment in research and development in the car industry will account for about 2 percent of the industry's revenue, and that figure will rise to 3 percent by 2020, Li says.

"By 2020 we also plan to set up an engineering college in the zone that specializes in the motor vehicle industry."

Li also says that to raise the profile of the motor vehicle industry, there are plans to build a motor vehicle-related cultural park with car museums and sports centers.

Even as the city's car industry has expanded, so has its automotive parts industry. In 2012 there were 165 automotive parts suppliers in Shenyang, and that figure has risen to 251.

Wang Zida, plant manager of Benteler Automotive (China) Investment Limited, which will open a factory in Shenyang soon, says the city presents an opportunity for automotive companies to enter both domestic and overseas markets.

Benteler Automotive, a German company whose headquarters are in Paderborn, North Rhine-Wesphalia, employs about 21,000 people worldwide in 20 development and sales offices and 70 factories in 29 countries. It develops and produces ready-to-install modules, components and parts for body, chassis, and engines. It set up its Shenyang operations in June last year.

"We came to Shenyang following BMW because it is one of our major customers," says Wang, who has been in the car industry for about 15 years.

"Shenyang has given us a lot more than what we expected, and we are confident about our growth here."

The new factory is due to start production in January and have sales revenue of about 1 billion yuan next year, Wang says, and is expected to employ 200 people by 2018.

"Shenyang is landlocked, but it has strong links with European companies, and that is going to help Benteler Automotive grow."

At present, 162 companies from 24 European countries operate in Shenyang, and investment from the continent in the city is largely in car and automotive parts manufacturing.

Last year imports and exports between Shenyang and Europe were worth $7.4 billion, exports accounting for $1.2 billion of that, says Liang Jing, of the Shenyang Municipal Bureau of Foreign Trade and Economic Cooperation.

The Shenyang government plans to set up a China-Germany equipment manufacturing industrial park with automotive manufacturing as one of its major industries, she says.

"This will also provide a fillip for the Shenyang automotive industry."

Tang Hongbin, director of the human resources department of Shenyang Behr Automotive Thermal Systems Co Ltd, says Shenyang is rich in vocational education resources, and that is good for the motor vehicle industry. "On the other hand, the city also needs more highly skilled people such as senior managers."

Contact the writers through huhaiyan@chinadaily.com.cn

Liu Ce contributed to the story.

(China Daily European Weekly 07/31/2015 page16)