Henan – China’s new logistics epicentre

A model for the Zhengzhou Airport Economy Zone (credit: China Daily)

A model for the Zhengzhou Airport Economy Zone (credit: China Daily)

Long overshadowed by the economic powerhouses of Beijing, Shanghai and Guangzhou, Henan province, and its capital city, Zhengzhou, has quietly emerged as one of the key strategic provinces as part of China’s ‘One Belt, One Road’ Initiative. With its strong capabilities in international and domestic logistics and its emerging tourism industry, Henan province is a growing international hub with ambitious plans to open up China’s inner-western regions to the outside world. 

Henan Province is located in the inner-western region of China, between Beijing and Shanghai. For a long time, Henan had been considered a rural backwater by the rest of China. However, somewhat surprisingly, its provincial economy is now one of the largest among inland provinces, growing at approximately 8% per year. It is also China's third most populous province with a population of over 94 million (behind Guangdong and Shandong). If it were a country, Henan would be the 12th most populous country in the world, just behind Mexico and ahead of the Philippines. 

With vast mineral reserves and large availability of fertile land, Henan’s economy is largely built on mining, agriculture and heavy industry. However, much like many other heavy industry-dominated areas in China, there has been a strong government-led push to move Henan up the value chain and develop capabilities in hi-tech manufacturing and IT. Three national-level industrial parks, focusing on hi-tech manufacturing, bio-pharmaceuticals and IT have recently been established in Zhengzhou and have already attracted a number of international investors. 

Tourism

As the birthplace of the Han people (China’s main ethnicity group), Henan is considered the “cradle of Chinese civilisation” and has great historical significance. Four of the Eight Great Ancient Capitals of China – Luoyang, Anyang, Kaifeng and Zhengzhou are all located in Henan. Also, some of China’s world famous tourist sites – The Shaolin Temple and Longmen Grottoes (which is World Heritage Listed) are also in Henan. The province receives nearly half a billion domestic Chinese tourists each year, providing a significant boost to the province’s developing economy.  

Logistics

Despite being largely unknown to the West, Henan’s capital city, Zhengzhou, is actually one of China’s largest international passenger and goods railway hubs. Zhengzhou Eastern Railway station serves as the junction of high-speed train services travelling all over China to Beijing, Kunming, Xian, Wuhan, Guangzhou, Shanghai and Hong Kong. 

Even more surprising is that Zhengzhou offers a direct cargo rail service crossing 10,000km to Hamburg in Germany which has been in operation 2013. According to estimates made by the Zhengzhou Hub Development and Construction Company, the Zhengzhou-Hamburg railway service accounts for one third of entire China-European rail traffic. 

As China’s ‘One Belt, One Road’ Initiative continues to grow, Zhengzhou has invested into further developing its capabilities, services and infrastructure aiming to become the logistics hub in north China. According to a recent South China Morning Post (SCMP) article, planning has begun for the Zhengzhou Airport Economy Zone around the Xinzheng International Airport. This zone has been labelled as an ‘aerotropolis’ mixing national and international logistics infrastructure with high-end manufacturing and business services. As well as the airport, it has 8 industrial parks, with businesses engaged in IT, electronics and e-commerce. The area covers 415 square kilometres – 5 times the size of Manhattan Island!

The planned Western Europe-Western China highway will also pass through Zhengzhou, connecting China’s Jiangsu Province with St Petersburg in Russia. Once completed, it will become possible to transport products by road to Russia in just 10 days.

Why Henan?

So why Henan and Zhengzhou? And why should Australian businesses consider it a launching pad into the China market? Firstly, in China’s 12th and 13th Five-Year Plans, tourism has been identified as a target sector requiring significant development and improvement, and China is looking outside of its borders to source foreign talent, knowledge and investment to bolster their own internal capabilities. As a popular tourist destination for domestic and international visitors, Australian tourism providers have an opportunity to participate in Henan’s flourishing tourism industry by exporting our capabilities, services and expertise and exploring options to partner with local companies. 

Secondly, Henan is a ‘tier 2’ province (and Zhengzhou a ‘tier 2’ city). This means that foreign competition is not as fierce as the big international players usually prefer to go to the wealthy, developed and well-established markets in tier 1 cities. Also, Zhengzhou has been identified as a key city of China’s ‘Go West’ policy which is focused on building up China’s underdeveloped western and central regions, encouraging foreign companies to do business in these areas and transform them into important and specialised industry clusters and hubs. 

Finally and perhaps most importantly, the ‘One Belt, One Road’ Initiative will transform Zhengzhou into an epicentre for regional and global logistics. The SCMP article highlighted that as Zhengzhou develops into a comprehensive import/export and transport hub, it is also expected to attract a number of secondary supporting industries such as warehousing and manufacturing businesses and eventually global financial services. The hub of activity and the creation of new jobs will drive people into area which will draw focus on the development of other industries such as, property, healthcare and education. We can expect that the Government will be providing incentives, particularly to foreign companies, to set up in Zhengzhou and participate in the ‘One Belt, One Road’ Initiative. So our advice to Australian companies is to get in now before it’s too late!