Why ZF Group invests in Rizhao

By Zhu Shengnan| (chinadaily.com.cn)| Updated : 2022-08-24

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German auto parts supplier ZF plans to build a plant to manufacture auto parts in the coastal city of Rizhao, Shandong province. This is ZF's fourth plant in Shandong since 1996, further expanding its footprint in China.

The plant is the first project invested by a Fortune Global 500 company in Rizhao in 2022, and one of the largest Fortune Global 500 manufacturing projects ever in Shandong province. It is expected to greatly bolster Shandong's auto industrial chain, expand opening-up and promote high-quality development.

ZF has established around 188 manufacturing plants in 31 counties, and first expanded to China 41 years ago. It now has four R&D centers and almost 50 plants in over 20 cities across China. Why did ZF Group choose Rizhao?

At first, ZF Group intended to select a site within 400 kilometers of Shanghai, which removed Shandong province from the running.

However, due to close interaction between the Department of Commerce of Shandong province and ZF Asia Pacific Group, the scope of consideration was expanded to 600 kilometers from Shanghai, which put three Shandong cities in the running, according to Liu Qing, deputy director of the Investment Promotion Division of the Department of Commerce of Shandong province.

ZF first came to Shandong province 25 years ago. It has set up two plants manufacturing auto parts for commercial vehicles, one after-sales center and one innovation center in Jinan and Qingdao. Shandong's high efficiency has been praised by ZF Group.

"We are looking forward to embracing a more open and innovative business environment driven by talent under the wise leadership of Shandong officials," said Dr. Holger Klein, chairman of ZF Friedrichshafen AG, at a special event entitled "Connecting Shandong with Fortune Global 500 & Deepening Cooperation in High-end Equipment Industry" held on Feb 11 this year.

In July of 2021, the Investment Promotion Division of the Department of Commerce of Shandong province invited ZF teams to carry out an in-depth investigation of Shandong's market. Rizhao stood out among nine cities in three provinces to become the final site destination. ZF Group and the Rizhao government signed an agreement on July 8, 2022.


An agreement is signed between ZF Group and the Rizhao government on July 8 of 2022. [Photo provided to chinadaily.com.cn]

The location, transportation system, labor costs, industrial strength and business climate were taken into consideration when choosing a site, according to Wang Runyi, CEO of ZF China.

Rizhao now has more than 350 enterprises engaged in auto or auto parts production and 30,000 workers in the industry. Four auto companies can produce 990,000 motor vehicles, one million engines, 1.4 million gearboxes, 15 million axles, 10,000 molds and 20 million pistons per year. Rizhao aims to build a complete industrial cluster for automobiles and auto parts worth more than 100 billion yuan ($14.57 billion) in output value.


An auto manufacturing plant in Rizhao [Photo by Guo Xiao/Jinan Daily]

The Rizhao government provided a package of services for the project, including shortening the process of industrial land use approval, surveying the local labor cost and customizing the procedure for setting up foreign-funded enterprises.

Shandong's Department of Commerce listed this project as a key foreign-funded project and set up a green channel to serve foreign investors and stabilize foreign investment.

"Rizhao has an advantageous location and robust transportation system. Rizhao's government officials are diligent and supportive. Shandong is open-minded to foreign investment and has great potential in terms of industrial strength and talent, which convinced us to make this agreement," said Wang.


Rizhao Port [Photo by Guo Xiao/Jinan Daily] 

Investment in the plant, which is expected to go operational by the end of 2022, will reach 60 million euros ($60.92 million). Covering 14,000 square meters, the plant will produce and sell airbag cushions and other safety products. It will also conduct relevant research and development.

"ZF Group's investment in Rizhao shows the confidence multinationals have in Shandong," Liu said, "Shandong's Department of Commerce will continue to attract more potential projects and cultivate high-quality enterprises to further promote the high-quality development of Shandong province."