The Lingang area of the China (Shanghai) Pilot Free Trade Zone. Photo: VCG
Investing in China still holds great appeal for foreign investors as their top choice, as the country’s economic strength and business infrastructure offer unmissable opportunities despite trade uncertainties.
Over decades of reforms and opening-up, China has accumulated a hefty amount of advantages as a destination of foreign investment during its ascent to a global manufacturing powerhouse.
Denis Depoux, managing partner at consulting firm Roland Berger Greater China, saw an “incomparable investment environment” for foreign companies in the country.
An integrated industry system, efficient infrastructure, a huge domestic market, well-educated human resources, a considerable economic growth rate as well as the application of new technologies — these are all part of the allure of China, Depoux told Xinhua.
“We see many of our clients looking into new investments in China, with a different angle: how to design, develop and test new products or services in an incredibly reactive and innovation-savvy Chinese market, how to tap into the vivid innovation ecosystem to develop products faster, for the Chinese market but also for other markets,” said Depoux.
Foreign investors have displayed firm faith in the Chinese economy in spite of international trade uncertainties. Foreign direct investment (FDI) in China rose 6.9 percent year on year to 604 billion yuan in the January-August period, Ministry of Commerce data showed. In US dollar terms, FDI inflow grew 3.2 percent.
Last year, China’s FDI grew by around 4 percent, in contrast with a 13-percent slide in global FDI flows, according to a report from the United Nations Conference on Trade and Development.
European companies continue to see solid revenue growth in China, according to the Business Confidence Survey 2019 conducted by the European Union Chamber of Commerce in China.
“China remains a top investment destination for most of our members, with over 50 percent of the survey’s respondents planning some form of expansion in China this year,” said Adam Dunnett, secretary general of the chamber.
The 2019 member survey of the US-China Business Council (USCBC) showed that for the council’s member companies, the Chinese market remains a priority over other markets due to its significance as a driver of revenue growth. Some 97 percent of its surveyed member companies reported increased profitability in China in 2019.
China’s attractiveness is partly defined by the global importance of its economy. The country has been the biggest engine of global economic growth since 2006. Its foreign trade in merchandise tops the world, while both its FDI and outbound direct investment rank the second place.
China is also the only country that possesses all the industrial categories in the United Nations industrial classification. Its transportation infrastructure lead the world, with the largest networks of high-speed rail and expressways in terms of mileage.
For decades, foreign firms have established well-functional local supply chains and hired workers, well-experienced engineers and managers in China, making it “easier said than done” to shift their business to alternative countries or regions in the short term, said Depoux.
While acknowledging that trade uncertainties affect business confidence, he noted that this will in the long run only accelerate the need for China to further localize some supplies, which will create opportunities for both domestic and multinational companies across all sectors.
The Chinese economy is presenting new prospects of profit growth for foreign investors as it transforms to high-quality development and experiences a consumption upgrade.
“For many companies, China is now their largest market,” said Dunnett. “The new areas of interest and cooperation include China’s increasing innovation prowess, its demand for environmental technologies … European companies are all keen to be part of these developments.”
Accelerated efforts to open up the market and improve the regul atory environment are expected to further strengthen foreign firms’ commitment to China.
Zhang Xinsheng, executive chairman of Shell Companies in China, said the energy company is benefiting from China’s measures to ease foreign investors’ access to the oil and natural gas sector.
“China has made solid and encouraging efforts in improving the business environment, which created more opportunities for foreign investors and offers more choices to consumers,” Zhang said.
With the foreign investment law coming into effect next year and the latest steps in shortening the negative lists for foreign investment, a significant improvement in the investment environment is foreseeable, said Zhang Yansheng, a researcher with the China Center for International Economic Exchanges.
“We expect a possible new wave of foreign investment flowing into China in future,” he said.