Despite being the most remote city from any sea in the world, Urumqi thrived as a trading hub along the Silk Road during the Tang and Ming dynasties. Located on the eastern frontier of Central Asia, Urumqi, or ‘beautiful pasture’ in Mongolian, is the capital of China’s Xinjiang Uyghur autonomous region. Lisa Quatch from Dezan Shira & Associates explains how its well developed transportation network and wealth of natural resources has seen it become the centre of industry, retail and commerce in Western China, as well as the primary point of entry into Central Asia.  

Economic Overview

In 2012, Urumqi’s GDP reached CNY 200.4 billion, an 18.5 per cent increase from 2011. Primary industry contributed CNY 2.5 billion and secondary industry contributed CNY 82.9 billion. Urumqi’s tertiary industry sector showed the highest growth, contributing an overwhelming CNY 115 billion to the city’s overall GDP, up from CNY 90.8 billion in 2011. The city is strategically important to the nation’s growth because it sits on one of China’s largest coal fields, with estimated reserves of 10 billion tons.

It hosts the annual China-Eurasia Expo, which boosts economic activity and strategic ties in the region. At the third annual expo this September total domestic deals signed were worth CNY 738.7 billion with over CNY 3.73 billion in foreign trade deals sealed as well.

From 2006−2011, GDP per capita increased from CNY 33,900 to CNY 52,900. Rapid growth of disposable household income is driving demand for consumer goods. In 2012, total retail sales of consumer goods were valued at CNY 83 billion. The booming retail industry is a result of a shifting demand from basic necessities and general merchandise to more trendy, medium or higher grade products. Besides local residents, Urumqi’s prime transportation networks make the city an ideal shopping destination for all of Xinjiang province.

Transportation

Urumqi’s strong infrastructure and transportation networks sees it serve as the transportation hub of Xinjiang Province, which shares borders with eight different countries.

• Rail: Urumqi Railway Station provides trains to Kashgar in the south, Kazakhstan and Europe to the west, and Beijing to the east. The Beijing and Lanxin Lines form part of the Trans-Eurasian Continental Railway, which goes from Rotterdam through the Alataw Pass (located on the Kazakhstan border) to Urumqi, and on to Lanzhou and Lianyungang. Construction of a high-speed rail line connecting Urumqi with Xining and Lanzhou is expected to be completed by next year.
• Air: Urumqi Diwopu Airport offers international flights to Hong Kong, Macau, South Korea and the former Soviet Republics, as well as domestic flights throughout China. It also thrives as a hub for China Southern Airlines.
• Road: Urumqi is connected via three main national highways: No. 216 runs through Xinjiang Province, No. 312 connects to Shanghai and No. 314 runs to the Pakistan border.

Administrative Divisions

Urumqi is divided into seven districts: Tianshan, Shayibake, Xinshi, and Shuimogou make up the urban sections; Toutunhe, Dabancheng and Midong are the suburban districts.

Development Zones

A priority target of the central government’s Go West policy, Urumqi has benefited from two development zones:

• Urumqi Economic and Technological Development Zone (ETDZ) enjoys a prime location within 10 kilometres of Urumqi’s downtown area, railway station, highways and airport. In 2003, the zone’s activities increased with the addition of an Export Processing Zone. Major industries are machinery, power transmission equipment, new energy, biopharmaceuticals, food and beverages, chemicals, and plastics.
• Urumqi High-tech Industrial Development Zone (HIDZ) was established in 1992. In 2011, it was merged with Xinshi District for a combined land area of 263 kilometres. Major industries include information technology, biopharmaceuticals, new materials, new energy, petrochemicals, unique resources processing, and machinery.

Investment Opportunities

Accessible transport networks have guided its transformation into Western China’s premier commercial and business centre. Urumqi is also an industrial hotspot—last year its total value of import and export was CNY 10.39 billion. To encourage growth, the Chinese Government has laid out numerous preferential investment policies.

Xinjiang Province is becoming more accessible to foreign investors as the local government gains more autonomy. This has had positive benefits for Urumqi. Traditionally, foreign investment into the region has been focused on food processing, mining, wholesale and retail, accommodation and services. Urumqi will continue to thrive in these industries, in addition to emerging growth in high value-added industries including energy and logistics.

The National Development and Reform Commission and the Ministry of Commerce have listed some priority industries for foreign investment in Xinjiang:

• Construction of high-quality wine grape bases and production of grape wine.
• Cultivation and deep processing of special agricultural products.
• Comprehensive utilisation of associated oil and gas resources.
• Recovery and utilisation of vented natural gas.
• Cultivation and processing of medicinal plants with local characteristics and development of new medicines.

Investments are encouraged in projects that will leverage Urumqi and Xinjiang Province’s natural resources and geographical advantages to develop new technologies and high value-added industries.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email china@dezshira.com or visit www.dezshira.com.