Sichuan Province

Key points

• Sichuan is the 4th largest province in China and the largest provincial economy in Western China, surpassing 3 trillion RMB in GDP for the first time in 2015.  Recent GDP growth (7.7% 2016) has slowed but remains above the national average.

• Chengdu, the provincial capital, is China’s 9th largest city economy and contributes slightly over a third of provincial GDP. 

• The province has benefited significantly from investment under China’s national Western Development Strategy, and now promotes itself as a convergence point for China’s large One Belt One Road and Yangtze River Economic Belt initiatives.

• The provincial economy is diversified across agriculture, mineral resources, manufacturing, ICT and services. 

• New Zealand established a Consulate in Chengdu in 2014. The New Zealand Prime Minister, Deputy Prime Minister and Minister of Defence have visited Sichuan since establishment.

• New Zealand has growing trade, investment and services links with Sichuan.  Trade and business opportunities for New Zealand companies exist in many areas including Foof and Beverage, agri-tech, aviation and airports, healthcare sector, tourism, residential property fit-out, start-up tech and entrepreneur collaboration, education and attraction of new foreign direct investment.

• Direct flights between Sichuan (Chengdu) and Auckland commenced in June 2017.

New Zealand-Sichuan links

New Zealand’s people-to-people links with Sichuan date back to before the founding of the People’s Republic, when at least one NZ missionary served at the Canadian Mission which established Chengdu’s Huaxi University.  In the 1950s Rewi Alley spent some time in the region en route to Gansu Province, after leaving Shanghai. 

New Zealand received approval to open a Consulate-General in Chengdu in mid-2014, its fifth diplomatic post in China.  The post is headed by New Zealand’s first Consul-General to South West China, Alistair Crozier.

Prime Minister Rt Hon John Key visited Chengdu on 12 November 2014 to open the Consulate, which commenced business operations shortly afterwards.  Deputy Prime Minister and Minister of Finance Hon Bill English visited Chengdu in July 2015.  Minister of Defence Hon. Gerry Brownlee also visited in October 2015.

According to official provincial statistics, New Zealand direct goods exports to Sichuan in 2016 totalled 1.1 billion RMB (NZ$230 million), a 17.4 per cent increase over 2015.  However, the total value of such exports is likely to be much greater as most New Zealand produce enters China via coastal ports (where they are recorded) and then internally distributed.  The data also does not cover growing NZ services exports.

As elsewhere in China, New Zealand agricultural products have a positive reputation in Sichuan for their food safety and high quality – especially dairy products, with awareness of our fruit, meat, seafood, honey, craft beer and wine also growing.  This matches well with local consumers, who have a reputation in China for valuing quality products, work-life balance and ‘life experiences’ (dining, entertainment and travel). The commencement of direct flights has also expanded potential for premium food and beverage products to be transported directly to market between New Zealand and Sichuan.

Trade and business opportunities for New Zealand companies also exist in other sectors including agri-tech, aviation and airports, healthcare sector, tourism and residential property fit-out.  Two New Zealand Trade & Enterprise (NZTE) business development managers at the Consulate in Chengdu assist NZTE customers in market.

A small but growing number of New Zealand companies now have offices in Chengdu/Sichuan. These include companies across a number of sectors, including banking analytics and service maintenance, dairy, logistics, beer and environmental engineering.

Links are developing between start-up and entrepreneur communities in Chengdu and New Zealand.  A number of New Zealand start-up companies have visited Chengdu in 2016-17 to explore opportunities to attract venture and angel capital, enter the Chinese market and/or identify potential local business partners.  A Chengdu start-up took part in Wellington-based business acceleration programme in 2016, with another opportunity available in 2017. There are hundreds of tech and business incubators in Chengdu, the best of which are actively seeking opportunities to internationalise and form strategic partnerships with New Zealand and other partners.

Two-way investment is growing.  NZ companies have made a number of historic investments in Sichuan Province and one company remains an investor in a high-tech manufacturing plant in Chengdu. There is also ongoing a mutual investment relationships in the dairy sector.  Sichuan companies have also recently invested in the New Zealand honey, restaurant, property development and quarrying/explosives sectors.     

New Zealand is a popular destination for Sichuan tourists.  The province is currently the sixth largest source of Chinese visitors to New Zealand (behind Beijing, Shanghai, Guangzhou, Jiangsu and Zhejiang), with over 16,000 visitors in 2016.  Immigration New Zealand opened a NZ Visa Application Centre in Chengdu in May 2015, and direct online applications / electronic visas are also now available for local travellers. 

In June 2017, Sichuan Airlines commenced direct flights between Auckland and Chengdu. According to Auckland International Airport the service with three flights a week adds a potential 81,000 seats annually and an estimated NZ$102 million to the New Zealand economy, through both passenger travel and air freight.

A number of New Zealand education institutions have institutional partnerships in Sichuan.  One of the most established is a joint degree collaboration between Wintec in Hamilton and Chengdu University, although a number of other New Zealand tertiary institutions are also forming local partnerships.  Christchurch and Sichuan Province established a strategic Education Alliance in September 2014 which has paired local schools and tertiary institutions from both sides together and offers teacher training, student and staff exchanges, and pathway programmes to tertiary study. 

Chengdu and Hamilton formally established a sister city relationship in 2015.  Hamilton Mayors Julie Hardaker and Andrew King led delegations to attend the 2016 and 2017 China (Chengdu) Global Innovation and Entrepreneurship Fairs respectively. Chengdu Mayor Luo Qiang visited Hamilton in June 2017.

There is a strong interest in New Zealand culture in Sichuan.  The Consulate has hosted or assisted a number of New Zealand cultural visits in Chengdu since 2015, including NZ Trio (classical music), Witi Ihimaera (author), David Hill (author), university media art exhibitors and school kapa haka and dance groups.  

An estimated hundred New Zealanders live in Sichuan, mainly Chengdu but also Mianyang and other cities.  There is an active WeChat community group, and get-togethers are held periodically.  The New Zealand Alumni Network in Southwest China, for local Chinese who have studied in New Zealand and returned home, has over 150 members and can also be contacted through the Consulate.

Background

Quick facts (2016)
Sichuan Province

Sichuan Province

Capital City: Chengdu

Population: 82.62 million

Ethnicity: 95% Han Chinese, also Tibetan, Yi, Qiang, Naxi

Land area: 485,000 km²

Total GDP: 3.27 trillion RMB (NZ$660.21 billion)

GDP growth: 7.7%

Per capita GDP: 36,695 RMB (NZ$8,019)

CPI growth: 1.9%

Sichuan was known historically as Tianfu (land of abundance), reflecting its role as a grain-growing ‘food basket’ of China.  Archeological discoveries of bronze-age Sanxingdui artefacts indicate that the Chengdu area was inhabited by a developed culture at least four thousand years ago.

Bordering seven other provinces, Sichuan has two distinct halves:  The fertile eastern plains where Chengdu is located; and the west rising up to the Tibetan plateau and including the province’s highest mountain at 7,556 metres.  Large parts of Western Sichuan are isolated and arid.  In contrast, Chengdu is a booming manufacturing, financial, innovation and education centre which, along with Chongqing are the most developed cities in Western China.

Sichuan is known worldwide for its spicy food, and as the centre for China’s panda-breeding centres. Five UNESCO World Heritage sites in the province are popular international and domestic tourism destinations.  Sichuan’s most famous modern personality was Deng Xiaoping, China’s leader from 1978-92.

Like New Zealand, Sichuan is in an earthquake zone and has suffered major earthquakes in recent years.  The 12 May 2008 ‘Wenchuan’ earthquake, with an epicenter just 80 kilometres northwest of Chengdu, measured 8.0 in the Richter scale and killed 69,000 people.  The Ya’an earthquake along the same fault-line in April 2013 killed 196 people. In this light, Sichuan has had extensive experience in post-earthquake recovery and rebuild.  

Economy

Sichuan’s Total GDP in 2016 was 3.27 trillion RMB (NZ$660.21 billion).   In 2016 GDP grew by 7.7% - a decline from 7.9 % growth in 2015 and 8.4% in 2014, consistent with national growth trajectory but still above the national average.

Sichuan’s economic performance was again spearheaded by its provincial capital Chengdu. Chengdu’s 2016 GDP was 1.22 trillion RMB (37% of Sichuan’s total GDP), up 7.7%, with per capita GDP of 77,470RMB, almost double the provincial average.  

In 2016, Sichuan’s economy had the following split between primary industry (12.0%), secondary industry (42.6%) and tertiary industry (45.4%).  The province, particularly Chengdu, has been a major beneficiary of the Chinese Government’s Western Development strategy implemented since 2001 to reduce the socio-economic gap between China’s eastern areas and the large interior.  These have included investment incentives for local and foreign companies, multiple transport and other infrastructure projects, and investment in education. 

Sichuan is also strategically placed to take an active role in the Chinese Government’s ‘One Belt One Road’ initiative (also known as the Belt and Road Initiative); as well as the Yangtze River Economic Belt, which aims to strengthen flows of goods and services between key regions along the river. 

Despite experiencing rapid growth, Sichuan’s population size and diversity also presents economic development challenges.  According to official provincial government data, as at the end of 2016, an estimated 2.72 million people in Sichuan continue to live below the national poverty line. Ethnic minority areas in Western and Southern Sichuan are the among the least developed areas in the province.

Sichuan has always had a strong agriculture sector.  The province is amongst China’s top grain and pork producers.  It is also one of China’s kiwifruit growing centres.  Changes to China’s rural land-use laws have opened the way for larger-scale farms and production models here, as in other provinces.  It also has substantial natural resources, including China’s largest natural gas and hydroelectricity resource, fourth largest forestry resource, and the world’s second largest rare earth deposits.  

Sichuan has emerged as a manufacturing hub in Western China.  The province has successfully attracted major international investment from companies such as Foxconn, which reportedly produces up to 70% of the world’s iPads in Chengdu, and Intel which produces half of its global chips and microprocessors.  Volkswagen, Volvo and Hyundai all have large car assembly plants in the province.   Sichuan also intends to strengthen a number of emerging sectors as it continues its economic diversification, including new materials, clean energy, modern logistics, aviation, automotive innovation and science and technology services. 

The province is also focused on developing higher value-add IT industries such as software development, mobile gaming, cloud computing, the ‘internet of things’, e-commerce and services outsourcing. The city’s reputation as an education hub (with 56 universities), and Sichuan’s wider history as a base for China’s military science and other R&D industries, have provided a strong foundation for this sector’s growth. 

In recent years, Sichuan has worked to improved its transport connectivity.  There are now more than 100 direct regional and long-haul international passenger routes. In 2016 Chengdu’s airport was the fourth busiest in China, with over 40 million passenger movements.   A second commercial airport, Tianfu International Airport, is currently under construction and will eventually boost the city’s passenger capacity to over 80 million per annum. The high-speed rail network also continues to expand: the 400km route from Chengdu to Chongqing can now be covered in 90 minutes.

On 1 April 2017 the Sichuan Pilot Free Trade Zone (PFTZ) was officially announced as one of seven free trade zones across China, bringing the total number in China to 11. The Sichuan PFTZ is designed to facilitate the development of modern services, high-end manufacturing, high-tech industry and the international transhipment of commodities. Additionally, a central aim of the Sichuan PFTZ is to support the development of the Western Reform strategy, “One Belt One Road” and the “Yangtze River Economic Belt”. The PFTZ is spread across three areas of Sichuan: Chengdu’s Tianfu New Area, the Chengdu Qingbaijiang Railway port area and South Sichuan Port area.