For­eign com­pa­nies know where bread is but­tered

China Daily (USA) - - COMMENT -

There have been many re­ports about for­eign in­vest­ment clos­ing up shop in China and flee­ing to other emerg­ing mar­kets. For as Sino-US trade fric­tions con­tinue to chill the in­vest­ment en­vi­ron­ment, doom­say­ers are quick to point out any signs they per­ceive por­tend­ing a com­ing win­ter for the Chi­nese econ­omy. In their eyes, China is fast los­ing its al­lure as the world’s top mag­net for for­eign in­vest­ment. To see the fal­lacy of such an as­sump­tion one needs only to look at the Ger­man au­tomaker BMW AG, which an­nounced on Thurs­day it will spend 3.6 bil­lion eu­ros ($4.1 bil­lion) to in­crease its stake in its Chi­nese joint ven­ture in Shenyang from 50 per­cent to 75 per­cent.

The Ger­man com­pany, the first to take ad­van­tage of China’s new pol­icy to let for­eign firms take ma­jor­ity con­trol of their lo­cal part­ner­ships, sees the ad­di­tional in­vest­ment as a ma­jor step in its strat­egy to con­sol­i­date its foothold in the world’s largest car mar­ket.

De­spite the anti-glob­al­iza­tion trend — as rep­re­sented by the trade dis­putes the United States has ini­ti­ated with its ma­jor trad­ing part­ners — the Chi­nese gov­ern­ment has been stand­ing pat in up­hold­ing the ban­ner of free trade, and has reaf­firmed its com­mit­ment by deep­en­ing re­form and open­ing-up the coun­try wider.

A new round of mea­sures have been rolled out to ease the re­stric­tions on mar­ket ac­cess, lower tar­iffs, stream­line cus­toms clear­ance pro­ce­dures and speed up de­liv­ery of ma­jor for­eign-in­vested projects. The move by BMW shows that these mea­sures are start­ing to bear fruit, as Premier Li Ke­qiang noted when he met with BMW’s CEO Har­ald Kruger on Wednesday.

What will surely re­in­force global in­vestors’ con­fi­dence in the Chi­nese mar­ket was Li’s pledge that in the fu­ture, these mea­sures will be even stronger and the level of open­ing-up will be even higher.

There is no deny­ing that for some for­eign en­ter­prises, the era of mak­ing “quick money” in China might have come to an end, as the cost of la­bor has in­creased and com­pe­ti­tion from do­mes­tic com­pa­nies has in­ten­si­fied. Many of the pref­er­en­tial gov­ern­ment poli­cies they en­joyed also are no longer in place as the coun­try em­braces up­grad­ing of its in­dus­try.

Yet given the growth po­ten­tial that is be­ing re­leased by China’s pivot to a more con­sumer-fo­cused econ­omy and its on­go­ing ur­ban­iza­tion drive it un­doubt­edly re­mains at­trac­tive to for­eign in­vestors.

That ex­plains why for­eign direct in­vest­ment in China grew by 7.9 per­cent in 2017 to reach an all-time high of $135 bil­lion, ac­cord­ing to the Min­istry of Com­merce. That up­ward trend has con­tin­ued through­out the first eight months of this year.

Like BMW, in­vestors with vi­sion and in­sight know that the longterm growth of the global econ­omy will be com­ing from China.

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