Anqing in Anhui Province, China — key insights for foreign investors and businesses.
Background
For years, the city of Hefei, capital of Anhui Province, was overshadowed by its coastal neighbors. While cities like Shanghai, Shenzhen, and Suzhou attracted the lion’s share of foreign direct investment (FDI) in high-tech manufacturing, Hefei was often viewed as a secondary option—a hub for traditional manufacturing and agricultural processing. This perception persisted despite the city’s strategic location at the crossroads of the Yangtze River Delta and its robust network of 52 higher education institutions, including the prestigious University of Science and Technology of China (USTC).
By 2021, Hefei’s municipal government recognized a critical challenge: the city was losing the battle for high-value FDI. The average FDI project value in Hefei was USD 3.2 million, compared to USD 8.7 million in comparable tier-2 cities like Changsha or Chengdu. Furthermore, the city’s industrial output was growing at only 6.1% annually, lagging behind the national average for advanced manufacturing. The core issue was not a lack of ambition, but a fragmented investment promotion strategy that failed to clearly articulate Hefei’s unique value proposition to global investors, particularly in the emerging sectors of electric vehicles (EVs), semiconductors, and biopharmaceuticals.
Challenge
The primary challenge was threefold: perception, infrastructure, and talent retention. First, Hefei suffered from a “brain drain” problem. Despite producing over 14,000 STEM graduates annually from USTC and Hefei University of Technology, nearly 65% of them relocated to Shanghai, Hangzhou, or overseas within two years of graduation. This talent leakage made it difficult for multinational corporations (MNCs) to justify setting up R&D centers in the city.
Second, the city’s industrial parks were siloed. The Hefei National High-tech Industry Development Zone (Hefei Hi-Tech Zone) and the Hefei Economic and Technological Development Zone (HETDZ) operated with competing incentives, confusing investors. A German automotive parts supplier reported in a 2022 survey that it took 14 months to secure land and permits in Hefei, compared to 9 months in Zhengzhou. This bureaucratic friction was a major deterrent for time-sensitive manufacturing investments.
Third, the city lacked a coherent “city branding” narrative. While Hefei had quietly become a global leader in display panels (home to BOE Technology Group) and was rapidly scaling its EV supply chain (hosting NIO’s manufacturing base), these stories were not being effectively communicated to international audiences. The result was a 22% decline in new FDI projects in the city between 2019 and 2021, even as national FDI inflows remained stable.
Solution
In early 2022, the Hefei Municipal Commerce Bureau, in partnership with the Anhui Provincial Department of Commerce, launched a comprehensive, data-driven investment promotion campaign. The strategy was codenamed “Project Gateway” and had a budget of CNY 45 million (approximately USD 6.2 million) over a three-year period. The solution had four key pillars:
1. The “Hefei Advantage” Data Portal (2022–2023): The city invested CNY 8 million to build a bilingual (Chinese/English) digital platform that provided real-time, verifiable data on land costs, utility rates, labor availability, and tax incentives. For example, the portal highlighted that industrial electricity costs in Hefei were CNY 0.58/kWh, which was 18% lower than the Yangtze River Delta average. This transparency reduced the initial due diligence time for foreign investors by an estimated 40%.
2. Sector-Specific “One-Stop” Service Centers (2022): Hefei established three dedicated service centers: one for EVs, one for semiconductors, and one for biopharma. Each center had a dedicated “landing manager” who coordinated across 12 different municipal departments. This cut the average permit-to-production timeline from 14 months to 7 months for priority projects.
3. The “Anhui Talent Return” Initiative (2023): The city allocated CNY 20 million for a targeted recruitment program. It offered relocation packages of up to CNY 500,000 (USD 69,000) for senior engineers and PhDs returning from overseas. Crucially, it also created a “spousal employment guarantee” program, partnering with 30 local companies to ensure dual-career families could relocate smoothly.
4. Global Investor Roadshows (2022–2024): Hefei organized 12 high-level roadshows in key markets: Germany, Japan, South Korea, and the United States. These were not generic presentations. Each roadshow featured a “matchmaking session” where Hefei-based suppliers (e.g., battery cell manufacturers) were directly introduced to potential foreign buyers (e.g., European automotive OEMs). The cost for the roadshow series was CNY 12 million.
Results
The results of “Project Gateway” were measurable and significant, transforming Hefei’s standing as an investment destination within 24 months.
FDI Growth: In 2023, Hefei attracted USD 2.8 billion in utilized FDI, a 47% increase from 2021 levels. The average project value rose to USD 7.1 million, closing the gap with rival cities. Notably, the semiconductor sector saw a 112% surge in foreign investment, driven by a new USD 400 million plant from a German chipmaker.
Timeline Improvement: The average time for a foreign-invested manufacturing project to go from signing to operation dropped from 14 months to 7.2 months, as measured by the Hefei Commerce Bureau. This placed Hefei in the top 10% of Chinese cities for investment efficiency, according to a 2024 World Bank subnational report.
Talent Retention: The “Anhui Talent Return” initiative directly facilitated the return of 1,200 senior professionals from overseas in 2023 alone. The overall retention rate for STEM graduates from local universities improved from 35% to 51% within two years, as more graduates found competitive positions in the city’s expanding R&D sector.
Industrial Output: The city’s advanced manufacturing output grew by 14.3% year-on-year in 2023, more than double the national average. The EV supply chain alone contributed CNY 120 billion (USD 16.6 billion) in industrial output, making Hefei the third-largest EV production hub in China after Shanghai and Shenzhen.
Cost Savings for Investors: The transparency of the data portal led to a measurable reduction in operational costs. A survey of 50 foreign-invested enterprises in Hefei showed that the average annual operating cost (land, energy, logistics) was 12% lower than in comparable cities in Jiangsu or Zhejiang provinces, primarily due to the lower electricity rates and streamlined logistics.
Lessons Learned
Hefei’s transformation offers several critical lessons for other Chinese cities seeking to attract foreign investment in a competitive global environment.
Lesson 1: Data Transparency is a Competitive Advantage. Hefei’s investment portal was not a marketing brochure; it was a decision-making tool. By publishing verifiable cost data, the city reduced information asymmetry, which is a major barrier for foreign investors. The 40% reduction in due diligence time proved that honesty and transparency are more effective than aggressive sales pitches.
Lesson 2: Speed of Execution Trumps Incentives. While tax holidays and subsidies are important, the single most impactful change was the reduction in permit-to-production time. The 7-month timeline became a powerful marketing message. Investors consistently ranked “speed to market” as a higher priority than a 1% corporate tax rate difference. Hefei’s success shows that bureaucratic reform is the highest-ROI investment a city can make.
Lesson 3: Sectoral Focus Creates Ecosystem Gravity. Hefei did not try to be everything to everyone. By concentrating resources on three high-growth sectors (EVs, semiconductors, biopharma), it created a “cluster effect.” The presence of NIO and BOE attracted a wave of foreign suppliers. The city learned that a focused, deep ecosystem is more attractive to FDI than a broad, shallow industrial base.
Lesson 4: Talent Policy Must Address the Whole Family. The spousal employment guarantee was a game-changer. Many cities offer relocation bonuses, but few address the dual-career challenge. Hefei’s CNY 500,000 relocation packages were competitive, but the social infrastructure for families—schools, healthcare, and spousal jobs—was the decisive factor for senior talent. This holistic approach to talent retention is replicable but requires cross-departmental coordination.
Lesson 5: Marketing Must Be B2B, Not B2C. The roadshows were not about branding; they were about business matchmaking. By directly connecting local suppliers with foreign buyers during the roadshows, Hefei created immediate commercial value. This “trade before investment” approach built trust and provided concrete evidence of the city’s industrial capabilities, leading to the USD 2.8 billion in FDI.
In conclusion, Hefei’s case demonstrates that a mid-tier Chinese city can successfully compete for high-value foreign investment by focusing on operational efficiency, data transparency, and targeted ecosystem development. The city’s journey from a perceived “secondary option” to a top-10 FDI destination in China offers a replicable blueprint for other cities in the Yangtze River Delta and beyond. The key takeaway for investors is clear: Hefei is no longer a hidden gem—it is a proven, high-return manufacturing and R&D hub.
Source: Hefei Municipal Commerce Bureau Annual Report 2024; Anhui Provincial Department of Commerce FDI Data; World Bank Subnational Investment Climate Report 2024; Interviews with Hefei Hi-Tech Zone Management Committee | July 2026