Expansive economic, demographic and social change in China is having significant impact on the San Francisco Bay Area, according to a report released by the Bay Area Council Economic Institute.

"The Bay Area, including Silicon Valley, is more closely connected to China than any other place in the US, and the relationship – which dates back 160 years – is continuing to deepen," institute president and CEO Sean Randolph said at the Commonwealth Club of California in San Francisco as the report was released. "This presents important opportunities for the region and its businesses".

Randolph wrote the 144-page report – Ties That Bind: The San Francisco Bay Area's Economic Links to Greater China – with Neils Erich. Their research covers the fields of economics, education, professional networks, trade and tourism, affiliates and invention.

China ranks second among the top sites for Bay Area businesses abroad, with 795 Bay Area affiliates located there, according to the report.

Chinese direct investment in the Bay Area keeps increasing, with a growing number of acquisitions in industries ranging from clean-tech to biotech, the report said. Investment in real estate is seeing particular growth, it said.

"China's internal transformation is creating huge demand for many technologies, products and services, while the Bay Area's innovation and technology industries are playing a key role in supporting China's transformation," Randolph said.

He said the Bay Area is not only a destination for Chinese investment and companies, but also for students and tourists.

For example, the number of students in the Bay Area from China has increased to 7,000 who contribute $219 million annually to the state and regional economies. In 2005, the number of Chinese students was 5,500.

Vying for overseas tourists, the region is also seeing a significant shift from low-end packaged tours to wealthier, individual Chinese travelers.

Through extensive interviews and using a wide array of examples, the report also "highlights the Bay Area's leading role as a landing pad for China as it seeks to prioritize innovation and expand its economic presence globally," said Rufus Jeffris, the vice president of communications of the Bay Area Council.

He said the report expands on a similar study the Bay Area Council Economic Institute released in 2006.

"Much has changed in China and the Bay Area since then, particularly in the context of the US recession and the global economic slowdown," he said.

"The economic relationship between China and the Bay Area has matured, but has also become more complex. Bay Area companies face challenges in a growing Chinese market," he said.

Meanwhile, new sectors such as renewable energy are in play, as China's government has made innovation a priority.

Chinese investment in Bay Area real estate, biotech and information technology is also increasing. And new incubators and connectors are building bridges for both established businesses and aspiring entrepreneurs.

The study offers information about how Bay Area and California companies may respond to the changing demands of Chinese consumers, investors and businesses both here and across the Pacific.

For companies seeking opportunities in China, the report finds that key growth sectors include architecture and urban planning, energy and environmental technologies, clean-tech, life sciences and health care, and mobile and Internet technologies.

Contact the writer at chenjia@chinadailyusa.com