Beijing is the capital of the People's Republic of China and the country's political and cultural center. Home to more than 21 million inhabitants and occupying an area of 6,500 square miles, Beijing is classified as a separate municipality, accorded the same status and responsibilities as a province.
All of China looks to Beijing as model city for economic development. Economic change in the past 20 years has transformed Beijing from an ancient political and cultural capital to a robust economic and financial marketplace. These changes offer a multitude of opportunities for foreign exporters. Beijing’s political emphasis on transitioning from a manufacturing and industrial-based economy to an entrepreneurial, technology-based economy is also fueling the entire Chinese economy.
Rapid economic changes and development have also created certain disadvantages such as increased traffic congestion and greater air pollution, issues the central government is working to address. Beijing is serviced principally by the Beijing Capital International Airport but also has numerous rail and highway links in and out of the city. High speed rail is Beijing’s predominant mode of transportation into and out of the city, with a trip to Shanghai, for example, taking only 5 hours.
Economy and Industry
Beijing’s economy is dominated by the services industry, which accounts for 76.7% of its GDP. The three biggest service sectors are financial services (14.5%), wholesale trade and retail sales (12.2%) and information technology services (9%). Beijing is encouraging the development of its modern services sectors, including outsourcing and creative industries. In an effort to better compete with world suppliers, Beijing aims to expand its high-tech industries in the areas of electronics, IT, biological engineering, pharmaceuticals, and telecommunications. Efforts are paying off. Beijing now ranks first in the world for growth in the technological sector. For example, in Zhongguancun District, 49 new startups are established every day. In 2014, over 660,000 patents were established.
Other industries in Beijing include tourism, textiles/garments and household appliances. Industrial production remains an important part of the economy and is dominated by the transportation, chemical, machinery, and metallurgy industries.
High Tech Industry
As Chinese companies strive to be more competitive on the world stage and improve their quality image, Chinese companies may start to choose foreign suppliers over cheaper, lower quality Chinese parts. According to the U.S. Department of Commerce’s International Trade Administration, China is the largest and fastest growing import market for U.S. semiconductors and the third largest and fastest growing market for U.S. semiconductor equipment.
U.S. companies may find opportunities beyond the traditional information technology industries and may wish to consider other subsectors such as smart governance, intelligent transportation and smart cites. In April 2015, Chinese and U.S. Government leaders launched a Smart Cities-Smart Growth trade mission to Beijing, Shanghai, and Guangzhou to expand opportunities for U.S. companies in these fast growing sub-sectors.
Wholesale Trade and Retail Industries
Wholesale trade and retail industries accounted for 12.2% of the service economy and benefitted greatly from Beijing’s rising middle class. This newfound confidence is changing Chinese shopping habits, and Chinese consumers are increasingly seeking out foreign goods.
Cross-border online trading is skyrocketing. According to the China E-Commerce Research Center, in 2014 cross-border trading reached 4.2 trillion yuan (USD $657 billion), and will reach 5.5 trillion (USD $861 billion) by the end of 2015. Foreign companies are taking advantage of this trend with websites such as Amazon, Alibaba’s Tmall Global, Walmart’s Yihoudian, and JD Worldwide, the largest platform in Beijing and northern China. U.S. companies no longer need to set up physical operations in-country. They can now easily reach Chinese customers online. Chinese government e-commerce pilot zones facilitate the importation/customs process, making it easier for U.S. goods to reach Chinese consumers. Although e-commerce in China is rapidly expanding, it remains a highly competitive market with many platforms to choose from and numerous pitfalls. New entrants should carefully research Chinese government rules and requirements, including participation costs of various platforms to evaluate the most appropriate business model.
Food and Beverage Industry
According to a study conducted by The Economist, China is the second-fastest growing food and beverage market in Asia, with an average annual growth rate of 30% in 2009-2014. As a result, Beijing’s food industry wages have increased.
Food scandals and distrust continue to plague China’s domestic food industry, making foreign food products particularly appealing. Rising incomes in Beijing are giving consumers the opportunity to be more selective in what they purchase. In particular, demand for infant formula, dairy products, and organic food has increased dramatically.
Many companies are taking advantage of the increasing demand for foreign food products, so much so that food imports to China more than quadrupled in the past ten years. According to the USDA, China is currently the largest international market for U.S. food and agricultural products, totaling 16% of U.S. farm exports, reaching USD $25.9 billion in 2015.
Geography and Development Zones
Beijing city is comprised of six districts: Dongcheng and Xicheng, located within the ancient walled city, Haidian, Chaoyang, Fengtai and Shijingshan.
Beijing Central Business District, located in Chaoyang, is home to more than 80 percent of Beijing’s international organizations and foreign chambers of commerce. This includes more than 35,000 businesses, 1,500 financial institutions and several media organizations, making it Beijing’s largest and fastest growing economic area. Also one of the most affluent areas of Beijing, the district boasts convenient transportation and advanced telecommunication systems. The district is poised to develop its sales, business and luxury goods industries.
The Beijing Economic-Technological Development Area is an 18-square mile economic zone located in northeastern Daxing District. Known as “Beijing E-Town,” the area boasts intensive, innovative and environmentally-friendly development.
Zhongguancun Science and Technology Park, also known as Z-Park, is spread over an area of 83.8 square miles and is home to more than 40 universities, including the prestigious Tsinghua and Peking Universities. Z-Park is divided into multiple research development zones, such as Zhongguancun Software Park (situated in the north-eastern part of Haidian District), which is China’s largest state-level software research and development center.
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