Foreign companies know where bread is buttered
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.