China rolls out the red carpet to attract foreign managers

  • For the first time in 25 years, the US Chamber of Commerce in China found that less than half of respondents to its annual survey named China as a top three investment priority.
  • After such a drop in sentiment, China is rolling out the red carpet to keep multinationals such as Apple and its supplier Foxconn in the country.
  • Many government-led groups have also traveled abroad to make sales pitches for China.

Pictured here is a Foxconn factory in Zhengzhou city on September 4, 2021.

Vcg | Visual China Group | Getty Images

BEIJING — China is pulling out all the stops to keep multinationals such as Apple and its supplier Foxconn in the country.

Such efforts to attract foreign investment come as the pandemic and geopolitical tensions prompt companies to diversify their supply chains outside of China.

For the first time in 25 years, the US Chamber of Commerce in China found that less than half of respondents to its annual survey named China as a top three investment priority. The number of companies considering or starting to relocate their production and sourcing outside of China is up 10 percentage points from a year ago, the study found.

The majority of respondents do not plan to move their supply chains, the AmCham report said.

The study was conducted last fall and the results had not changed significantly since China ended its strict Covid controls, AmCham said. The Chinese Ministry of Commerce did not respond to a request for comment.

After such a dip in sentiment, China is working hard to get foreign companies to invest – and support domestic growth. The Commerce Ministry said on Thursday it would launch events for an “Invest in China Year” for the first time.

As a sign of how hard local governments are trying to attract foreign dollars, top officials from central China’s Henan province personally welcomed Foxconn chairman Young Liu last week when he visited his company’s factory there, the province announced.

Foxconn operates the world’s largest iPhone factory in Zhengzhou, the capital of Henan.

The party secretaries of both Zhengzhou city and Henan province met with Foxconn, along with the mayor and governor, state media said. In China, the ruling Chinese Communist Party takes the lead in decision-making, and such high-level participation in the meeting with Foxconn indicates that all matters discussed can be carried out more quickly.

During a Covid outbreak and subsequent lockdown last year, Foxconn’s factory in Zhengzhou became a hot spot of attention as some of its roughly 200,000 workers decided to leave and walk home.

Apple later said the factory outages in Zhengzhou would delay delivery of some iPhone 14 models.

China ended strict Covid controls in December. In February, Foxconn’s Zhengzhou factory was operating at full capacity and staff were working in two shifts to meet high customer demand, factory manager Wang Xue told local media.

Foxconn confirmed that its chairman has visited Henan and plans to work with the local government on projects. But the company did not share details about those investment plans, or whether they plan to move production out of China.

China likes to capitalize on how other multinationals are interested in local business opportunities, especially now that international borders have reopened.

Senior executives from Apple, Pfizer and Mercedes-Benz are among those seeking to visit China to discuss business, the Commerce Department spokesman said at a news conference last week.

The spokesperson noted that there are dozens of multinational companies that are talking to the ministry about such high-level visits.

Mercedes-Benz confirmed to CNBC that CEO Ola Kallenius plans to visit China. Pfizer had no comment. Apple did not respond to a request for comment.

China also visits potential investors in their home country.

After a government meeting in December called for greater efforts to attract foreign capital, many government-led groups have traveled abroad to make sales pitches for China.

Wang Jinxia, ​​deputy director of Qianhai – an economic development zone in Shenzhen – led a group to Dubai, Singapore and London in February to stir up investment interest.

He described the visits as achieving “remarkable results” – but did not elaborate. He also pointed to “serious challenges” in attracting foreign investment. Those include unfair competition with local players in China due to industrial policies, lack of legal protections for foreign companies in China and geopolitical risks, Wang said.

The Biden administration has increased restrictions on US business with China, such as restrictions announced last year on US companies and individuals working with Chinese partners on the most advanced semiconductors.

It is not clear to what extent other restrictions will be announced.

Learn more about China from CNBC Pro

To be clear, international investment is still coming into China at a steady clip.

Foreign direct investment rose 14.5% in January from a year ago to 127.69 billion yuan ($18.39 billion), according to China’s Ministry of Commerce. That is faster than the increase of 6.3% for the whole of 2022.

South Korea, Germany and the UK were the largest sources of such foreign investment in 2022, the ministry said, without citing the US

For a Chinese region like Henan, maintaining or increasing investment from foreign companies is a lifeline. Official data showed that Foxconn’s iPhone factory accounted for 84% of the entire province’s exports in 2019.

China’s Commerce Minister Wang Wentao on Thursday made a relatively rare public acknowledgment of long-standing complaints from foreign companies about government procurement policies that favor local Chinese companies.

Addressing those issues are “priorities for our work,” he said in Mandarin, translated by CNBC. “We will study and implement policies and measures with relevant departments to ensure the equal participation of foreign companies.”

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *