Week of February 21, 000
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Shanghai Beats Out Hong Kong for Alcatel's Asian HQ

In a major victory for China's business recruitment efforts, French telecom manufacturer Alcatel (www.alcatel.com) has picked Shanghai as the site of its Asian headquarters. Alcatel's Shanghai operation will also include an R&D center, with employment at the two new facilities totaling some 2,300 employees, company officials said.

The Alcatel decision is also a major win in Shanghai's efforts to woo Asian regional headquarters away from Hong Kong, which has long been the dominant player for regional HQs in Southeast Asia. Hong Kong, in fact, was one of the finalist locations, Alcatel officials said. The other two finalist locations were Singapore and Sydney, two cites that also represent more traditionally established beachheads for regional headquarters. Alcatel's regional headquarters in Shanghai will oversee an area stretching from South Korea to Australia.

The new facilities will also be decidedly high end. The new research center, for example, will have 2,000 engineers working on mobile phones and other Alcatel technologies.

Shanghai's Regional HQ Appeal

Part of the rationale for the Alcatel decision rests in Shanghai's emergence as the mainland's business center, as opposed to Beijing, which is clearly the nation's governmental seat. (The duality of those two cities, in fact, has prompted some companies to set up two-pronged regional headquarters, siting facilities in each area.)

Alcatel hasn't divulged the exact site of its new operations in Shanghai, which is a favorite among the Beijing officialdom, who regard it as a "socialist market economy" showcase. Sure to be a strong candidate for the new Alcatel facilities, however, is the Pudong New Town area (www.pudongit.com), which has landed parts of the regional headquarters locations for the likes of Allied Signal, Kodak, Roche and Sharpe.

Government officials, in fact, decided that Pudong should be the site the area's international airport, Pudong International.

Alcatel Says China's Telecom Uptake Will
Surpass Japanese Market by 2003

But China's sheer market clout, plus a strong belief in the bullish state of the nation's telecom market, also played major roles in Alcatel's picking Shanghai, at one time considered the "Paris of the East."

"Alcatel is now betting considerably on China,'' Chairman Serge Tchuruk explained at the new conference announcing the company's location decision.

Indeed, Alcatel is looking for nothing less than explosive growth in the Chinese telecom market.

The company expects China's telecom market to grow by 10 percent a year, surpassing Japan by 2003 to become the region's biggest. The number of Chinese mobile phone users, for example, is projected to grow from 40 million today to more than 115 million in 2003.

Considered one of the world's biggest and most modern, China's fixed-line network will help facilitate that telecom growth, Alcatel officials said.

And, added Tchuruk, demand for fiber-optic cable, switching equipment and other products should grow even faster whenever China is admitted to the World Trade Organization.

Yangzi Delta Output Exceeds Indonesia

Picking a Shanghai location for its new facilities certainly should put Alcatel in an area that will experience a lot of China's rapid telecom uptake. Shanghai is the dominant population cluster in the Yangzi Delta, which, with one-sixth of China's population, accounts for one-third of the nation's economic output. In fact, the economic output of the Yangzi Delta equals all of Indonesia.

Alcatel, however, was already a major player in China. Although foreign service providers are barred from China, Chinese carriers are big buyers of U.S., European and Japanese cable and equipment, much of it made by joint ventures. Alcatel has 17 joint ventures in China with a total of 5,000 employees -- 80 percent of them in Shanghai.

©2000 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.