Country still has investment advantages
Some Western media, such as The Wall Street Journal and The Financial Times, have been reporting recently that foreign companies are encountering trouble in China.
These reports claim that the demand for some foreign products, such as cosmetics and luxury goods, has largely declined because of the slowdown in Chinese economic growth and rising labor costs in the domestic market. Meanwhile, they also blame China for picking on foreign companies and applying selective absorption toward foreign capital. They say foreign companies have difficulty operating their businesses and some can hardly safeguard their legal rights.
However, such speculation and claims that the investment environment in China worsens for foreign companies are twisting basic facts and ignoring the bigger picture of China’s attractiveness. And they could have other motives.
For one thing, such suggestions can influence the flow of international capital, attracting capital back to Western markets. The economic recovery in the West is still built on sand, and there have been repeated reversals. In reality, global capital prefers emerging markets, especially China. By discrediting the investment environment and the prospects of investing in China, some in the West are trying to cultivate new sources of economic growth and so revive the economies of Western countries. Thus the purpose of attacking China’s investment environment is to influence and speed up the return of capital to Western countries.
For another, it is aimed at disturbing the Chinese market and setting their own rules. In the past few years, the growth rates of emerging economies have slowed compared to the high-speed development they previously enjoyed, but the Chinese economy is now showing a strong and obvious upswing. Especially as the country’s leaders pledged to deepen reform at the Third Plenum of the 18th Central Committee of the Communist Party of China held in November. This clearly indicates the economy will still enjoy high growth in the future. Some Westerners have complicated feelings about this.
On the one hand, they are eager to share China’s economic growth bonus and involve themselves in the planning system; while on the other hand, they are anxious about the coming strategies, being afraid the changes will hurt their interests.
They have therefore launched propaganda campaigns to win over public opinion, denying the upbeat tone of China’s investment climate and the Chinese economy. Moreover, such campaigns are being used to force China to continually grant foreign companies “supernational treatment” in policies like permission for foreign investment, market competition, and government procurement.
In fact, there are many reasons why some foreign companies have seen their profits decline in China recently. It is not only because the next wave of domestic demand is still waiting to be released, but also because the competitiveness of Chinese enterprises has been strengthened and they have a bigger share of the market now.
Generally speaking, the advantages of China’s investment climate in attracting foreign capital are still obvious and remain strong, as the country is transforming from relying on low labor costs toward the comprehensive advantages that include huge market space, the quality of the labor force, soft investment environment, among other things.
Besides ensuring the economy’s sustainable development, the ongoing and deepening reforms should greatly boost the confidence of foreign investors.
First, the improvement in the quality of the labor force has created conditions for attracting high value-added and technical content foreign investments. Second, the implementation of an innovationdriven development strategy and encouraging the development of many strategic emerging industries in China can provide policy support for improving the level and quality of foreign investments. Third, the regional difference and multilevel labor supply can meet the differing needs of foreign investments.
The adjustment of some Chinese policies is to maintain its existing economic advantages and better attract foreign investment. They will enable China to participate in the international division of labor and cooperation at a higher level. More importantly, it is a country’s basic right to prioritize its foreign investments according to its own development needs. China has already surpassed the stage of blindly importing foreign capitals, and is now giving priority to advanced technology, managerial experience and high-quality talent, which are more aligned with its current development needs.
China will offer more opportunities to such foreign companies by working on the improvement of its investment climate and accelerating the transformation of government functions to facilitate foreign investment.