Foreign firms seek expansion in China

09:08, March 30, 2011      

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Observers may still worry that China is losing its attractiveness for inbound investment after it abolished preferential policies for foreign firms. However, with a profitable 2010, foreign entrepreneurs are already beginning to explore deeper into China's vast market.

Yu Jinsong, the general manager of Mahr Precision Metrology Suzhou, was proud that his company's sales volume last year had doubled, compared to figures from 2009. The growth was the largest among all of Mahr's global branches.

The German supplier of weight scales started its Suzhou factory early in 1999 and had witnessed average annual sales growing by 15 percent in the past 11 years, said Yu, who has worked with the company since it was established.

"Furthermore, we are expecting a 30 to 40 percent growth in sales this year," he added.

In response to a call for fair competition, China introduced a unified national tax system for domestic and foreign companies in December. This marked an end of a 30-year period of "super-national treatment" for foreign firms, which mainly involved preferential tax and land policies.

The move aroused worries that China might become less attractive for investment and that foreign firms might shift their focus to other countries because of the end of preferential policies and rising labor costs.

The changes did not seem to drive away investors. The measures have instead prompted expansion in manufacturing and processing, with investors building their Chinese subsidiaries into regional headquarters and research centers.

According to an annual business climate survey from the American Chamber of Commerce (AmCham-China) released last week, 83 percent of respondents are planning to increase their investment and expand operations in China this year, 4 percentage points higher from a year ago.

The survey, which interviewed 434 AmCham-China members, said that up to 85 percent of respondents reported increased revenue from their China operations in 2010.

"Contrary to the common notion that foreign companies come to China because of a cheap labor market and to export to the US and other markets, members consistently express a strong interest in breaking into the Chinese consumer market and serving the Chinese customer," said the survey report.

According to Yu, Mahr Metrology is planning to pay more attention to the Asian market. He adds that the Suzhou branch is expected to become the future Asian headquarters as the organization shifts its focus from measurement device manufacturing to sales and development.

"Ten years ago, we came to China for cheap labor, now it is no longer an attraction," he said.

Instead of low costs, the advantage that keeps foreign companies in the country include efficient government services and better facilities, he added.

Peter Voser, the chief executive of Royal Dutch Shell, said that the company sees China as one of the most attractive regions for investment in the world. He adds that local authorities are becoming more open and are able to attract foreign investment in sectors that need it most.

Meanwhile, the Chinese government is also expecting foreign enterprises to play a more active role in China's economic development.

Transforming economic development pattern did not mean that China would close its door to foreign enterprises, Commerce Minister Chen Deming said earlier this month during his speech at the 12th China Development Forum in Beijing.

It is only for fair market competition that China has rescinded preferential policies for foreign firms. China is treating both Chinese companies and foreign companies equally, Chen said.

Regarding issues that worry foreign enterprises, Chen promised that policies will be open and transparent to all enterprises regardless of innovation capabilities and government procurement.

Siemens CEO Peter Loescher said during the forum that it was exciting to be part of China's economic development and the innovation process. Currently, Siemens has 16 research and development centers in China, which contains more than 2,300 engineers who are working on over 1,000 patents each year.

Yu Jinsong said that even though intellectual property rights (IPR) infringements still occurred, he appreciates China's efforts in protecting these rights.

"Most IPR violation can be solved with professional legal services," he said.

Source: Xinhua
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