Explainer: What makes China magnet for multinational corporations?

Release time：2024-05-01 08:35:55 Source：Horizon Herald news portal

BEIJING, April 29 (Xinhua) -- China is becoming even more attractive to foreign investors, as the latest figures from the Ministry of Commerce showed that the number of newly established foreign-invested firms in the country hit 12,000 in the first quarter of 2024, up 20.7 percent year on year.

The upbeat sentiment was also evidenced in the 2024 Kearney Foreign Direct Investment (FDI) Confidence Index, where China jumped from the seventh to third position, and retained the top place among emerging markets.

What has attracted so many foreign investors, including multinational corporations, to pick China? The country's mega-market, premium supply chain, top-class talent pool and sound growth prospects were what business executives and academics mentioned the most in recent interviews with Xinhua.

VITAL MARKET

"No company can afford to survive if it does not sell in China," Khairy Tourk, professor of economics at the Stuart School of Business at the Illinois Institute of Technology in Chicago, told Xinhua in a recent interview.

For multinational corporations, China's vast market represents tremendous opportunities and is essential for them to maintain global competitiveness.

"China has a large population and vast market space, and the demand for diversified and high-end consumption is increasing day by day," said Frederico Freire Jardim, Asia President of U.S. food giant Kraft Heinz.

Calling the Chinese market "hugely important," Ola Kallenius, chairman of the board of management of Mercedes-Benz, told Xinhua he saw great potential in the Chinese auto market, the biggest in the world.

The German automaker is poised to bring into China a total of 15 new models, signaling intensified efforts to consolidate its presence in the increasingly competitive market.

Recently, many overseas organizations have upgraded their forecasts for China's economic growth. Goldman Sachs forecast the Chinese economy will expand by 5 percent year on year in 2024, up from 4.8 percent previously, and Citi raised its China GDP forecast to 5 percent from 4.6 percent.

With a large population and a strong momentum of economic rebound, China's consumer market is showing great vitality.

Ministry of Commerce statistics released on April 19 showed Chinese consumers spending on big-ticket items including cars, home appliances and furniture expanded in the first quarter of the year, while spending on services consumption also rose significantly.

PREMIUM SUPPLY CHAIN, TALENT POOL

Boasting a complete and large-scale industrial system, China has been the world's top manufacturing country for 14 consecutive years, with the added value of the manufacturing sector accounting for around 30 percent of the world's total.

China has become an optimal supplier for a vast array of products, owing to its efficient supply chain, convenient logistics and a highly productive workforce

"There's no supply chain in the world that's more critical to us than China," Apple CEO Tim Cook said last month in Shanghai, reiterating the company's long-term commitment to the Chinese market.

Patrick Charignon, vice-president for Asia-Pacific of EDF Renewables, a subsidiary of France's leading electric utility company EDF, holds a similar view.

China's supply chain "perfectly" meets all the needs for making investments, and Chinese banks have also been supporting energy investment projects, Charignon said at an investment roundtable held in Paris earlier this month.

In Rugao City of east China's Jiangsu Province, production lines of Swedish truck maker Scania are being built. The new factory is expected to launch production in 2025 and raise the company's global production capacity with an annual output of 50,000 trucks.

"We want to tap into the innovative power of China and also its supply chains," Mats Harborn, president of Scania China Group, told Xinhua.

Apart from first-class supply chain, China also boasts a high-performance workforce. This has proven particularly appealing to companies like Apple, drawn by China's abundance of premium talent.

"In the United States, you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple football fields," Cook has previously said.

Valeo, a world-leading auto parts supplier headquartered in France, launched the Valeo (Shenzhen) intelligent manufacturing center last year. Zhou Song, president of Valeo China, said that currently the group has its largest research and development team in China, and has become a part of the innovation eco-system in China's auto sector.

ROSY GROWTH PROSPECTS

China achieved remarkable economic growth in the past decades, creating lucrative returns for multinational corporations that invest here. The country's pursuit of high-quality development and green transition are presenting even broader prospects for foreign investors.

In the first quarter of this year, China's high-tech manufacturing sector attracted 12.5 percent of the FDI inflow, up 2.2 percentage points compared to that in the same period last year. The trend is evidence to investors' favor for new sectors generated through high-quality development.

Harborn from Scania China Group said he sees tremendous potential in China's economic transformation. He said that China's emphasis on fostering new quality productive forces promises favorable prospects for foreign companies doing business here in the long term.

China's economy is now focusing on quality, sustainability and efficiency. At the center of China's transformation is sustainable and efficient transport and logistics, he said, adding that's why Scania China Group can play an important role in China.

Foreign companies, including U.S. electric car manufacturer Tesla, are also riding on the wave of China's green transition, as the country's pursuit of low-carbon and sustainable development nurtures new opportunities.

Besides promising growth prospects, the business environment in China is continually improving.

In recent months, the country has launched new opening-up policies, such as measures to encourage overseas institutions to invest in China's technology-oriented enterprises, all aimed at making it easier for foreign investors to do business in China.

（Editor:Fu Bo）

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