- For the first time in 25 years, the American Chamber of Commerce in China found that less than half of respondents to its annual survey ranked China among the top three investment priorities.
- After such a drop in morality, China is rolling out the red carpet to keep multinationals like Apple and its supplier Foxconn in the country.
- Many government-led groups have also traveled overseas to make sales pitches for China.
Pictured is a Foxconn factory in the city of Zhengzhou on September 4, 2021.
CGV | Visual Group China | Getty Images
BEIJING — China is doing everything it can to keep multinationals like Apple and its supplier Foxconn in the country.
Such efforts to attract foreign investment come as the pandemic and geopolitical tensions push companies to diversify their supply chains away from China.
For the first time in 25 years, the American Chamber of Commerce in China found that less than half of respondents to its annual survey ranked China among the top three investment priorities. The number of companies considering or beginning to relocate manufacturing and sourcing outside of China rose 10 percentage points from a year ago, according to the survey.
The majority of respondents do not plan to relocate their supply chains, according to the AmCham report.
The survey was conducted last fall and the results have not changed significantly since China ended its strict Covid controls, AmCham said. China’s Ministry of Commerce did not respond to a request for comment.
After such a drop in confidence, China is working hard to keep foreign companies investing and supporting domestic growth. The Ministry of Commerce said on Thursday that for the first time it would launch events for a “China Investment Year”.
In a sign of the difficulty local governments are trying to attract foreign dollars, senior officials from central China’s Henan Province personally welcomed Foxconn Chairman Young Liu last week during his visit to his company’s factory there, the province said.
Foxconn operates the world’s largest iPhone manufacturing plant in Zhengzhou, the capital of Henan.
Party secretaries from Zhengzhou city and Henan province met with Foxconn – as well as 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 the issues discussed can be implemented more quickly.
During a Covid outbreak and subsequent lockdown last year, Foxconn’s factory in Zhengzhou became a hot spot of attention when some of its roughly 200,000 workers decided to leave and return home walk.
Apple later said disruptions at the Zhengzhou factory would delay shipments of some iPhone 14 models.
China ended its strict Covid controls in December. In February, Foxconn’s Zhengzhou factory was producing at full capacity, with staff working in two shifts to meet high customer demand, factory manager Wang Xue told local media.
Foxconn confirmed that its chairman had visited Henan and planned to collaborate with the local government on projects. But the company has not shared details of those investment plans, or whether they intend to move production out of China.
China is eager to show how interested other multinationals are in local business opportunities, especially now that international borders have reopened.
Senior executives from Apple, Pfizer and Mercedes-Benz are among those willing to travel to China to discuss business, the Commerce Ministry spokesperson told a news conference last week.
The spokesperson noted that dozens of multinational companies were discussing the high-level visits with the ministry.
Mercedes-Benz has confirmed to CNBC that its 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 countries.
After a government summit meeting in December called for greater efforts to attract foreign capital, many government-led groups have traveled overseas to make sales pitches to China.
Wang Jinxia, deputy director of Qianhai – an economic development zone in Shenzhen – led a group to Dubai, Singapore and London in February to attract investor interest.
He described the visits as achieving “remarkable results” – but did not elaborate. He also noted “serious challenges” in attracting foreign investment. These include unfair competition with local players in China due to industrial policies, lack of legal protection for foreign companies in China and geopolitical risks, Wang said.
The Biden administration has tightened restrictions on U.S. business with China, such as restrictions announced last year on U.S. companies and individuals working with Chinese partners on the most advanced semiconductors.
It is unclear to what extent further restrictions will be announced.
To be clear, international investment is still coming into China at a steady pace.
Foreign direct investment rose 14.5 percent in January from a year ago to 127.69 billion yuan ($18.39 billion), according to China’s Ministry of Commerce. That’s faster than the 6.3% increase for all of 2022.
South Korea, Germany and the United Kingdom were the main sources of such foreign investment in 2022, the ministry said, without mentioning the United States.
For a Chinese region like Henan, retaining or increasing foreign business investment is a lifeline. Official data showed that in 2019, Foxconn’s iPhone factory accounted for 84% of exports across the province.
On Thursday, China’s Commerce Minister Wang Wentao made a relatively rare public acknowledgment of longstanding complaints from foreign companies about government procurement policies that favor local Chinese companies.
Addressing these issues is “a priority for our work,” he said in Mandarin, translated by CNBC. “We will study and put in place policies and measures with relevant departments to ensure the equal participation of foreign companies.”