Why Certain International Corporations Remain Attracted to China

04 Sep, 2023

Why Certain International Corporations Remain Attracted to China

Every day seems to bring negative economic news about China, but for certain foreign companies, China remains an attractive prospect. Furthermore, there may be a silver lining in this negative news, as Sean Stein, Chairman of the American Chamber of Commerce in Shanghai, suggested at the recent U.S.-China Business Forum in New York.

According to Stein, Chinese government officials, eager to meet their investment targets, are currently in a favorable position to offer incentives to foreign companies interested in operating in China. Stein emphasized that there is an unprecedented charm offensive underway to encourage more investments and expansions.

He mentioned that government officials have received new directives from Beijing, focusing on increasing foreign investment and collaboration. This shift in priorities has led to discussions at all levels about offering subsidies, land, tax breaks, licenses, administrative approvals, and more to attract foreign businesses.

One significant advantage of investing in China is its ability to spread out global costs effectively. Many companies require economies of scale, and being in China is often essential to achieving this global competitiveness.

Stein also highlighted the importance of being close to Chinese suppliers, especially for businesses that rely on China for their supply chains. The COVID-19 pandemic emphasized the need for resilient and redundant supply chains, driving increased investment in this area.

Joint ventures in China have evolved as well. While they were once seen as burdensome for foreign companies, today, many investors actively seek Chinese joint venture partners who bring unique capabilities, whether in digital expertise, marketing, technology, or government relations.

Staying ahead of competition is another driver for American investment in China. Companies are keen to maintain their edge and fend off disruptive competitors, making China an attractive location for growth.

However, it's important to note that while China offers investment opportunities, it has become more complex and challenging. Competition from Chinese companies has grown, and improvements in areas like intellectual property protection and regulatory transparency have reversed in recent years. Complex data regulations and evolving government attitudes add to the challenges.

In conclusion, while China still holds promise for foreign businesses, it's a rapidly changing landscape that demands a deep understanding of the evolving dynamics and regulations. Companies considering investment in China should be prepared for a transformed environment compared to just a few years ago.

The U.S.-China Business Forum featured a range of speakers from various industries, discussing the opportunities and challenges of doing business in China. The forum, which was held in person for the third time since 2019, provided valuable insights into the evolving dynamics of the U.S.-China business relationship.