What is the attractiveness of the Chinese market to foreign investment?

Xinhua News Agency reporter

According to data from the Ministry of Commerce, the actual amount of foreign investment used by China in the first quarter of this year was 301.67 billion yuan, a year-on-year decrease of 26.1%. At the same time, there were 12000 newly established foreign-funded enterprises, a year-on-year increase of 20.7%, and the proportion of manufacturing investment attraction increased.

How to view the current situation of China's investment attraction? What is the attractiveness of the Chinese market to foreign investment? Xinhua News Agency reporters went deep into Guangdong, Jiangsu, Sichuan, Shanghai, Beijing and other places to investigate the current situation of investment and development of foreign-funded enterprises in China.

It is difficult to abandon the demand of the ultra large scale market

The sea breeze brushes over Donghai Island in Zhanjiang, and the former border fishing village has become the largest port industrial island in Guangdong.

In the Donghai Island Petrochemical Industrial Park, BASF, a German chemical company, has made new progress in the construction of its largest overseas investment project, the BASF (Guangdong) Integrated Base, with a total investment of approximately 10 billion euros. At the beginning of the year, the thermoplastic polyurethane (TPU) device here was officially announced for production, and its products will be widely used in fields such as new energy vehicles, biomedicine, and people's livelihood industry.

"Currently, China is the world's largest chemical market and has important strategic significance for BASF," said Lin Hanping, President of BASF Asia's Large Project. The integrated base located in Zhanjiang, Guangdong will become an important platform for BASF to achieve profitability and sustainable growth in China in the future.

The chemical industry affects thousands of industries and households. It is predicted that China will be the main driving force for global chemical industry growth until 2030, contributing about half of global chemical production.

"The Chinese market has always been our biggest growth engine," and "the growth of the Chinese and Asian markets continues to lead." From biopharmaceuticals to new energy materials, from cosmetics to food and beverage, reporters have visited multinational enterprise leaders in multiple industries, and their unanimous answer is that they are optimistic about the growth trend of the Chinese market, confirming that the Chinese market remains attractive in the turbulent and intertwined international context.

Horizontally, the slowdown in global economic growth, rising geopolitical risks, and weakened external demand are intertwined with multiple complex factors, resulting in a sluggish global cross-border direct investment. The report of the United Nations Conference on Trade and Development points out that global cross-border investment will decrease by 18% in 2023.

Looking vertically, from 2019 to the first quarter of 2023, China's absorption of foreign investment continuously broke historical records.

Despite multiple challenges, the Chinese market still exhibits strong resilience, which is directly reflected in the "ledgers" of many multinational corporations.

In the fiscal year 2022-2023, Zeiss Group's revenue in Greater China reached 13.49 billion yuan, an increase of 22%; In 2023, Bosch Group's sales revenue in China reached 139.1 billion yuan, accounting for about 20% of global revenue and an increase of 5.2%; Valeo China's sales in 2023 reached 30 billion yuan, accounting for approximately 17% of global revenue

According to the calculation of the State Administration of Foreign Exchange, the return on foreign direct investment in China has been about 9% in recent years, which is at a relatively high level internationally.

With the recovery of China's economy, some industries are showing a positive trend in attracting foreign investment. According to data from the Ministry of Commerce, in the first quarter, the actual use of foreign investment in the accommodation and catering industry, construction industry, wholesale and retail industry, and financial industry increased by 84.7%, 17.5%, 2.2%, and 1.4%, respectively.

From entering China in the early stages of reform and opening up, to relocating its Asia headquarters to Shanghai in 2021, the US food company Kraft Heinz continues to increase its investment in China.

"China has a large population and a vast market space, and the demand for diversified and high-end consumption is increasing day by day." Kraft Heinz Asia President Fred told reporters that in the past three years, Kraft Heinz has invested 670 million yuan to improve the operational efficiency of several factories in China and expand production scale. This year, an additional investment of 320 million yuan will be made.

Not long ago, Apple opened its largest retail store in Asia, the Jing'an Store in Shanghai. Apple CEO Tim Cook opened the door to welcome and interact with customers. Earlier, Bloomberg reported that as iPhone sales in China declined, Apple will open new stores in Shanghai, and the Chinese market remains "crucial" as China has the world's largest smartphone consumer group.

Taikoo Group Chairman Bai Deli recently stated that Taikoo Real Estate will continue to invest in the mainland and Hong Kong markets; Taikoo Coca Cola will complete the largest factory in China in Kunshan, Jiangsu this year; Cathay Pacific will continue to increase its mainland routes; Port Machinery Group is also expanding its aircraft maintenance center in Xiamen.

Choosing China means choosing opportunities and rewards. Many multinational enterprises are seizing the huge opportunities of China's high-quality development and promoting economic transformation.

In the first quarter of this year, the actual use of foreign investment in China's manufacturing industry reached 81.06 billion yuan, with high-tech manufacturing attracting 37.76 billion yuan, accounting for 2.3 and 2.2 percentage points higher than the same period last year, respectively.

In this spring, factories are growing rapidly in Rugao, Jiangsu. This under construction factory is the largest overseas investment by Swedish heavy vehicle manufacturer Scania in over 60 years, and is expected to start production in 2025 with an annual output of 50000 trucks.

Once upon a time, Scania suffered a loss of orders due to reaching its production capacity limit. Scania China Group President He Mochi admitted to reporters that considering the development potential of the Asian and Chinese markets, the company has ultimately decided to establish a production base in China to increase production capacity, focusing on commercial opportunities for high-end, customized, and electrified heavy-duty trucks in Asia and China.

According to the 2024 Global Foreign Direct Investment Confidence Index (FDI) report released by globally renowned management consulting firm Colney, China has jumped from 7th place last year to 3rd place, ranking first in the emerging market special ranking.

Rui Dario, founder of Bridgewater Fund Investment, recently stated in his latest article titled "Why I Invest in China": "The key question is not whether I should invest in China, but how much I should invest."

The advantages of a complete and efficient production and supply chain are difficult to replace

In Bao'an District, Shenzhen, Guangdong Province, the global benchmark factory of French automotive parts supplier Valeo - Valeo (Shenzhen) Intelligent Manufacturing Center, with the roar of highly automated intelligent manufacturing equipment, automotive electronic components such as LiDAR, control modules, and communication modules are produced from here and exported to factories of car companies around the world.

Fareo predicts that Shenzhen Fareo's sales will maintain a high annual growth rate of over 20% for the next five years. Zhou Song, President of Valeo China, said that Shenzhen has a relatively complete foundation in the new energy vehicle industry. About 30% of the value composition of the intelligent connected vehicle industry comes from the information industry, which can effectively connect with Shenzhen's electronic information technology industry.

What attracts many foreign-funded enterprises is not only the massive demand created by the "Chinese market", but also the hard power of "Chinese innovation" and "Made in China".

"China has become one of the countries with the most innovation in the fields of electrification, autonomous driving, and intelligent vehicle networking. We want to leverage China's innovation power and supply chain," He Mochi said.

China has the world's most complete and largest industrial system, and has been ranked as the world's largest manufacturing country for 14 consecutive years. Its manufacturing added value accounts for about 30% of the world's total.

In addition, the Logistics Performance Index released by the World Bank shows that China ranks 19th. In terms of logistics infrastructure, China ranks higher than developed economies such as the United States.

"For us, there is no other supply chain in the world that is more critical than China," Cook said in Shanghai last month, stating that Apple will strengthen long-term cooperation with Chinese supply chain partners.

With the continuous development of China's economy and society, the era of attracting foreign investment through cheap labor has long passed, and high-quality talents are becoming one of the biggest bonus points in the eyes of foreign investors. One of the main reasons why "Fruit Chain" has taken root in China is its talent advantage.

Cook once made a visual comparison: "Our products require advanced molds. In the United States, I'm not sure if our mold engineers can fill a room. In China, you can find mold engineers from several football fields."

Nowadays, China has comprehensive advantages such as a complete industrial system, a super large market, a stable social situation, and a long-term positive economic fundamentals.

Therefore, in the view of Cai Weinian, the tax director and partner of Anyonghua North District, China's position as an investment destination cannot be replaced.

"China has relatively stable policies, reliable electricity supply, and a considerable number of engineers. The certainty and resilience of the Chinese economy have become the key to increasing foreign investment in China," said Cai Weinian.

High level opening up brings vast opportunities for dividends

Since the beginning of this year, multinational executives have once again sparked a "visit to China fever", feeling the strong spring atmosphere of China's economic recovery and improvement.

From April 14th to 16th, German Chancellor Scholz visited Chongqing, Shanghai, and Beijing during his visit to China. An economic delegation composed of leaders from internationally renowned multinational corporations such as Siemens, BMW, and Mercedes Benz also visited China.

Since the beginning of this year, the China Development High Level Forum, the first landmark event of "Investing in China", the Boao Forum for Asia 2024 Annual Conference, the Consumer Expo, and the Canton Fair have attracted many multinational enterprise leaders to come to China for exchange, inspection, and cooperation negotiations.

According to data from the Ministry of Commerce, investment in China by Germany and ASEAN increased by 48% and 5.8% respectively in the first quarter of this year. China has established 12000 new foreign-funded enterprises, a year-on-year increase of 20.7%.

Faced with the increasingly complex international environment of high winds and waves, China insists on responding to the uncertainty of the external environment with open certainty.

Since the beginning of this year, the "Invest in China" series of activities hosted by the Ministry of Commerce have been held in Denmark, Germany and other countries, promoting active overseas investment attraction in Shanxi Province, Shaanxi Province, Tianjin City, Suzhou City and other places.

"When you see this country, see its vitality, and see people's enthusiasm for the future, you know how important it is to cooperate with China for the German economy," said Friedman Heffig, representative of the German Small and Medium Enterprises Federation, to reporters at a special event in Germany

16 policy measures have been introduced to further support overseas institutions in investing in domestic technology-based enterprises, a national and pilot free trade zone version of the negative list of cross-border service trade has been released, and the "24 foreign investment regulations" have been implemented and refined. The "Regulations on Promoting and Regulating Cross border Data Flow" have been released, clearing payment bottlenecks for foreign visitors to China and expanding the scope of visa free countries... In recent years, China has successively launched new high-level opening up measures to continuously optimize the business environment.

According to CNN, China is working hard to stabilize foreign trade and increase investment. Since 2023, China has launched a series of policies to attract foreign investment and relax foreign investment access in the field of science and technology innovation. According to an article published by Bloomberg, the Chinese government has introduced multiple measures in the past year to make it easier for foreign businesses to conduct business in China.

Foreign investment access is a barometer for expanding opening up, opening up broader development opportunities for multinational enterprises.

In February of this year, three foreign financial institutions, including Lianbo Fund Management Co., Ltd., Dongfang Huili Financial Technology (Shanghai) Co., Ltd., and Kaide Private Equity Fund Management (Shanghai) Co., Ltd., collectively opened for business; In March, Standard Chartered Securities, China's first newly established foreign-owned securities company, announced its official launch; In April, Faba Securities (China) Co., Ltd. was approved for establishment

Hong Jianbang, Director of the Strategy and Digitalization Office of Bank of East Asia (China) Co., Ltd., introduced that China is accelerating the two-way opening of the financial sector, expanding the interconnection of domestic and international financial markets, and promoting the internationalization of the RMB. The company has benefited from cross-border, trade financing, and investment banking businesses, driving the growth of non interest income.

Foreign funded enterprises interviewed generally mentioned that cultivating and developing new quality productive forces and promoting high-quality development in China will inevitably create unlimited business opportunities.

Just recently, Yabao's Guangxi Qinzhou factory in the United States signed a 5-year green power procurement agreement with France Electric Power Group's wholly-owned subsidiary, Fadian New Energy. Two foreign companies are joining hands in China to embrace new business opportunities.

The lithium hydroxide produced by Yabao is an upstream raw material for lithium batteries, benefiting from China's booming new energy vehicle industry. Xu Yang, the President of Yabao China, is full of confidence in the future. Patrick Sarnion, Vice President of Asia Pacific for French Power Renewable Energy, told reporters in Paris that China's installed capacity of renewable energy is world leading and is a very important market for French Power.

As a multinational executive once said, "Don't ask us how the Chinese market is, just look at the assets and projects we are investing in China, which is the best manifestation of long-term optimism about the Chinese market." (Journalists Xie Xiyao, Shi Hao, Ren Jun, Tang Shining, Tai Beiping, Zheng Kaijun, Wu Tao, Li Qianwei, Zhou Rui)