Foreign firms place bigger bets on China; moves defy Western media hype of exodus

Visitors view an electric vehicle at the booth of German automaker Volkswagen during the China Motor Show (Tianjin) 2022 in north China's Tianjin. File photo: Xinhua

Foreign companies are placing bigger bets on China, which is striving to improve its business environment and supply chain strength, contradicting Western media claims of a supply chain exodus.

As the Chinese government attaches greater importance to attracting foreign investment in the second half of the year, a number of foreign companies are announcing deals to increase their investment. A number of government agencies including the National Development and Reform Commission and the Ministry of Commerce (MOFCOM) have rolled out targeted policies to foster China's business environment.

To capture China's rising market for electric vehicles, Japanese automaker Toyota renamed its research &development center as the Intelligent ElectroMobility R&D Center by TOYOTA (China) Co Ltd on Tuesday to mark a new era in the company's development in China.

German carmaker Volkswagen Group said on July 26 that it was strengthening its position in the Chinese car market with cooperation between the VW brand and Chinese electric carmaker XPENG in a deal valued at $700 million, along with another partnership between Audi and SAIC, one of China's largest carmakers.

On June 8, a joint venture (JV) between BNP Paribas Asset Management Holding and the asset management unit of Agricultural Bank of China was given the green light for business operations in China, to become the fifth JV asset management firm in which a foreign investor holds a controlling stake.

A survey by AHK Greater China, a German business chamber, indicated that 55 percent of some 300 surveyed German companies said they plan to expand their China footprint within two years, according to Xinhua.

In addition, Standard Chartered and Ant Group agreed to deepen their partnership in driving green and inclusive finance, global fund management and sustainable development.

"We are honored to enter into this extended agreement and deepen our longstanding strategic partnership with Ant Group… We look forward to leveraging our shared vision to further our global cooperation in environmental, social and corporate governance, inclusive finance for small and medium enterprises, and digital innovation," said Jose Vinals, group chairman of Standard Chartered, in a press release sent to the Global Times on Monday.

Amid global headwinds, foreign direct investment (FDI) in the Chinese mainland in actual use fell 2.7 percent in the first half of 2023, with the country having used 703.7 billion yuan ($97.4 billion) of foreign capital, MOFCOM data showed on July 19.

FDI in China's high-tech industries grew at an annual pace of 7.9 percent, while investment in high-tech manufacturing specifically surged by 28.8 percent year-on-year, underlining the high-quality growth trend of FDI.

Some 24,000 new foreign-invested enterprises were established during the period, a surge of 35.7 percent from a year earlier.

"It's a general trend that more competitive and international foreign companies attach more importance to investment in China - a market crucial to their development strategies," Bian Yongzu, a senior industry research fellow, told the Global Times on Tuesday.

China's industrial upgrading creates higher-level market demand, which means larger market potential, Bian said. In addition, the country is superior to many other Asian economies such as India and Vietnam in terms of financing, complete industry and supply chains, infrastructure, research and development, and innovation capabilities, he said.

Expanding their presence in the Chinese market is one of the strategies of many foreign enterprises amid the China-US trade conflict and the US' intensified "decoupling" from China, reflecting their reliance on the mature and efficient Chinese market, Bian said, and more foreign capital is expected to flow to China along with the country's high-standard opening-up and economic recovery.

"Foreign investment in China maintained stable growth in the first half. It's normal that some foreign companies are squeezed out of the Chinese market due to their poor operation and industrial structure adjustment," Huo Jianguo, vice chairman of the China Society for World Trade Organization Studies in Beijing, told the Global Times on Tuesday.

In a trip to the China (Shanghai) Free Trade Zone's Lingang Special Area last week, Chinese Premier Li Qiang vowed to attract more foreign enterprises to invest in China, and called for joint efforts to ensure stable industrial and supply chains.

Foreign companies and China's development have a mutually reinforcing relationship, according to the premier.

While the "decoupling" push by the US has raised concerns over geopolitical risks, the first and foremost purpose of enterprises is seeking profits and sustainable development. The huge Chinese market and continuous improvement in the business environment are keeping China as an attractive market for foreign companies, Huo said.

The NDRC said it will foster mechanisms for the building of new systems for a higher-level open economy, comprehensively improve the business environment and use domestic circulation to attract global resources.

The MOFCOM said in a meeting on Thursday that localities should step up efforts to stabilize and increase foreign investment, and speed up the process of setting up a roundtable mechanism with foreign companies for communicating on a regular basis and responding to companies' concerns in a timely manner.