The "Headquarters Economy" has played a major role, says Beijing Vice-Mayor Lu Hao. In fact, "in many affluent cities (which have fewer multinational headquarters), the proportion is much lower," he notes.

It also means considerable taxes and investment.

On January 15, Unilever occupied the new building of its China headquarters in Shanghai, which involved an investment of 400 million yuan, while German conglomerate Siemens is constructing a new building in Beijing for its China headquarters at a cost of 1 billion euros.

The Central Business District (CBD) is home to the vast majority of MNCs' regional hubs in Beijing. The CBD accounts for less than one-tenth of the land of Chaoyang District, the largest district in the Chinese capital, but contributes a quarter of the total taxes collected, says Cheng Hong, deputy chief of Chaoyang District.

From 1993 to 2003, Beijing absorbed $1.5-2 billion in foreign investment annually, which soared to $3 billion and $3.5 billion in 2004 and 2005.

Lu estimates the figure climbed to $4 billion last year. "The 'Headquarters Economy' has boosted MNCs' business activities in Beijing."

Beijing vs Shanghai

In the past few years, a number of MNCs, including AMD, Fuji Xerox, General Motors, Goodyear and American International Insurance, have relocated their regional headquarters from Hong Kong or Singapore to the Chinese mainland.

The huge benefits brought by the "Headquarters Economy" have intensified competition between Beijing and Shanghai, both of which are now aspiring to emerge as regional business hubs.

The central government has been introducing a series of incentives, such as special distribution, import & export rights and wider market access, to encourage multinationals to set up regional headquarters in China.

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