Prospects bright as restrictions on foreign access to manufacturing to end
Multinational companies have vowed to deepen ties in China, as the country's new industrialization push brings vast new opportunities in advanced manufacturing and digital transformation amid sluggish global economic recovery.
Despite a globally subdued investment sentiment, executives of foreign companies said they are inspired by China's promise to remove all restrictions on foreign investment access to manufacturing. They also said the country's huge market, as well as favorable government policies that spur innovation, hold great appeal.
Their comments came after President Xi Jinping said during a keynote speech on Oct 18 at the third Belt and Road Forum for International Cooperation in Beijing that China "will remove all restrictions on foreign investment access in the manufacturing sector".
Xi also stressed in an instruction in September the importance of high-quality development in promoting new industrialization to lay a strong material and technological foundation for Chinese modernization.
Denis Depoux, global managing director of consultancy Roland Berger, said new industrialization is one of the key drivers leading China's future development, and this will generate new opportunities for multinationals.
"Thanks to the improved productivity, broad industrial clusters, and well-established infrastructure, China was, is and will remain the factory of the world," Depoux said.
"The combination of a broad local market and the strong legacy export base make China difficult to replace. We believe that China's fundamentals remain strong, in spite of a difficult transition in the short term. The global factory is now producing more added-value products because of the massive new industrialization efforts," he added.
Yu Shaohua, an academician at the Chinese Academy of Engineering, said that replacing traditional industrialization with new industrialization will inject new vitality into the high-quality development of the real economy, as digital technologies such as 5G, industrial internet, big data, cloud computing and artificial intelligence are getting increasingly intertwined with manufacturing.
"Advancing the deep integration of the digital economy and the traditional industrial economy is an important path to achieve new industrialization, which will spawn new infrastructure, new application models and a new industrial ecology," Yu said.
That is in line with what foreign companies are eyeing to tap into China, which boasts a complete supply chain support system and a strong logistics system, in addition to its big market and government policies that spur innovation, experts said.
New industrialization is the top area for more potential foreign investment, followed by green technology and other domains, according to a survey earlier this year of more than 390 foreign-funded enterprises and foreign business associations by the China Council for the Promotion of International Trade.
Lily Wang, head of the Engineering Plastics business unit at Covestro, said the German chemical company will continue to invest and expand in the Chinese market, given its "vibrancy, development potential and pace".
Earlier this month, Covestro announced that its first dedicated line for the mechanical recycling of polycarbonates began operations in Shanghai. Its cumulative investment in China exceeded 3.9 billion euros ($4.1 billion) as of the end of 2022.
Ilham Kadri, CEO of Belgian chemical manufacturer Solvay, said the Chinese market is strategically important in the group's global strategy, and Solvay is willing to increase investment to address demand in the country.
In September, the company unveiled a new research building in Shanghai that "will be an innovation hub and usher in breakthroughs in critical sectors in China, especially hydrogen, electronics and semiconductors", Kadri said.
Even though foreign direct investment in the Chinese mainland in terms of actual use between January and September dropped 8.4 percent year-on-year — which was partly due to the very high comparison base of last year's data — the total amount still stood at 919.97 billion yuan ($126.2 billion). That was still a very good performance compared with other major economies in the world, said Gao Lingyun, a researcher at the Chinese Academy of Social Sciences.
Specifically, the actual use of FDI in manufacturing grew 2.4 percent year-on-year during the period, and in high-tech manufacturing it jumped 12.8 percent, according to the Ministry of Commerce.
Meanwhile, China saw the number of newly established foreign-invested enterprises reach 37,814 in the first nine months of this year, up 32.4 percent year-on-year, continuing an upward trend.
"These facts speak louder than rumors. China's advantages and potential in attracting and utilizing foreign investment have not diminished," Gao said.
When it comes to the high-tech sector, executives of foreign companies also showed strong commitment to China.
Tim Cook, CEO of Apple, said during a trip to China last week that the US company is confident about the prospects of the Chinese market and is willing to strengthen cooperation with China.
Cook told China Daily during his trip that Chinese app developers have the potential to repeat their global success stories with the company's augmented reality device Vision Pro, as they have already done with Apple's iPhones.
The remarks show that China is not only important to Apple's current iPhone ecosystem, but also the key to the company's future augmented reality innovation ecosystem, experts said.
Shen Bo, senior vice-president of ASML Holding, the Dutch chip manufacturing equipment provider, said that although chip export control tensions continue, ASML is committed to serving the Chinese market, as the local semiconductor industry's growth offers big opportunities.
"Our long-term presence and business operation in China over the past three decades is a strong testimonial of our continuous confidence and commitment to the market," he said.
Chen Xudong, chairman and general manager of IBM Greater China, said: "Apart from its colossal market size, China possesses a complete and diverse industrial chain, as well as a highly skilled workforce. Hence, the Chinese economy exhibits remarkable resilience.
"As China continues to expand domestic consumption, accelerate industrial upgrading and promote high-level opening-up, I believe that China has ample policy space to counter economic downturn pressures and explore new growth opportunities in sectors such as new energy, artificial intelligence and green low-carbon industries," Chen added.