Foreign firms bullish on China as investment keeps flowing in

Editor's note: Ma Xiaobai is a research fellow of the Development Research Center of China's State Council. Zhu Jiayi is a PhD student of Tsinghua University. The article reflects the authors' opinion and not necessarily the views of CGTN.

China has firmly established itself as a primary destination for foreign direct investment, with multinational companies from across the globe continuing to expand their footprint in the country despite global headwinds.

This sustained confidence demonstrates the enormity of the Chinese market's potential as well as the government's effective policies to attract overseas capital.

Sentiments from China's major economic partners mirror its enduring investment appeal. A high-level Japanese business delegation that met Chinese Premier Li Qiang declared that China is an "important engine for global growth" and that healthy Chinese economic expansion greatly encourages the Japanese business community.

According to a recent survey conducted by China Council for the Promotion of International Trade, 70 percent of the respondents remained optimistic about the Chinese market over the next five years, with more than 90 percent rating the Chinese market as "attractive."

Additionally, annual survey data revealed that over 80 percent of the participants appraised the business environment of the world's second-largest economy as "satisfactory" or better in 2023. Their persistent positive outlook underlines the market's resilience as well as structural growth prospects in the long run.

After the supply chain turbulence in 2020 and 2021, China has seen inflation moderate in 2022 and 2023.

The post-COVID-19 pandemic stability is a key factor driving continued foreign investment, especially in export-oriented manufacturing industries across automotive, electronics, machinery and chemicals. 

The report of the 20th National Congress of the Communist Party of China pointed out that high-level opening-up should be promoted. It called for appropriate reductions to the negative list for foreign investment, along with protecting the rights and interests of investors as per the law, and fostering a world-class, market-oriented business environment.

Meanwhile, China's policy support and incentives have boosted investor sentiment. In August 2023, the State Council issued guidelines proposing 24 targeted policies to improve foreign capital utilization, protect intellectual property and ensure fair treatment, including streamlined immigration, export assessment mechanisms and vocational training partnerships.

The country's Central Economic Work Conference in December 2023 further emphasized expanding high-standard opening-up across services and advanced manufacturing. Concrete foreign investment stabilization steps like easing restrictions, tapping consumer demand and consolidating trade structures were outlined as well.

As multinationals seek new drivers of profitability globally, few markets promise comparable scale and progress like China. The rapidly expanding middle class and its unrivaled population scale offer a golden target market, especially across aspirational categories like premium cars, fashion, tourism, healthcare and high-tech consumer products.

As costs rise in traditional manufacturing destinations, China has retained competitiveness thanks to mature supply chains and its pivot towards high-tech, high-value production. It is already the world’s largest vehicle market, with further room for penetration. The thriving electric vehicle industry has also beckoned legacy automakers and new players alike, as batteries and clean energy gain emphasis.

China's commitment to indigenous innovation across 5G networks, artificial intelligence, biotechnology, new materials and other frontier spheres also promises new opportunities for foreign companies in research and development (R&D) partnerships, commercialization and talent development. Policy incentives for green manufacturing and digital upgrades have already catalyzed foreign participation in emerging high-growth industries.

In essence, China's structural strengths, expanding domestic demand and new sources of competitiveness continue to outweigh near-term external challenges. As reforms deepen and doors open wider to foreign capital, China is cementing its stature as the most dynamic economy going forward this decade. The vote of confidence displayed by investors through capital allocation has validated this promise.

In tandem with expanding opening-up policies, China has also taken active steps to address investor concerns and obstacles on the ground. The central government and regional authorities have set up foreign investment working mechanisms to communicate with business leaders and swiftly resolve difficulties flagged across market access, talent sourcing, localization and more.

In recent years, the authorities have responded to a large number of proposals from multinationals through policies and concrete actions to align operating conditions with global standards. For instance, China has announced easier visa policies for skilled talent and expanded tax deductions for R&D spending. Mechanisms like "Measures for the Complaints of Foreign-Invested Enterprises" issued by the Ministry of Commerce enable timely support across customs, immigration and regulation issues.

Such facilitation mechanisms and feedback loops have boosted goodwill and increased the willingness for continued investments in China despite external uncertainties. They have also enabled the identification of promising sectors for win-win partnerships going forward. International chambers of commerce lauded the active government responsiveness as a key improvement in China's business environment over the past decade.

(Cover via CFP)