Multinational Companies Optimistic About Chinese Market
Wed, April 21, 2021

Multinational Companies Optimistic About Chinese Market

Company executives said that they are optimistic about the Chinese market, considering that the country has an “improving business environment” and an extensive market potential / Photo by: Jonipoon via Wikimedia Commons

 

Company executives from different countries who participated in the two-day Qingdao Multinationals Summit, a VIP forum on cooperation with multinational corporations, said that they are optimistic about the Chinese market, considering that the country has an “improving business environment” and an extensive market potential. This is according to Chinese news provider Xinhua.

German multinational engineering and technology company Robert Bosch GmbH’s chairman Volkmar Denner said that the potential for their company in the Chinese market “remains tremendous in the medium to long term.” He added that the market of China is not saturated, which means that it still provides new demand for the firm.

China’s Auto Market

Denner also said during the summit held in Qingdao that although there are slow-moving auto sales in the country, China remains to the largest auto market in the world ahead of the United States and Europe. This only means that there are still millions of potential customers in China.

China remains to the largest auto market in the world ahead of the United States and Europe. This only means that there are still millions of potential customers in China / Photo by: Nancy Pelosi via Flickr

 

China: Second-Biggest Economy in the World

While the order of the top national economies globally shifts slightly from one year to the next, the main players are often the same and China is now the second-biggest economy worldwide in terms of GDP growth, which is 6.3 percent from 6.1 percent the previous year. The world’s biggest economy remains the United States (2.5 percent from 1.7 percent the previous year) and the third key player is Japan (1.1 percent from 0.6 percent). The data is based on an economic indicator platform Focus Economics.

The urbanization rate of China also reached about 60 percent. Denner believes that it will offer wide market prospects for the multinational firms as more and more people are shifting from rural areas to urban areas.

As the leading automotive services and technology supplier in the world, Robert Bosch GmbH now has more than 60,000 employees in China. Next to its home country Germany, China is Bosch’s second-biggest workforce.

Other participants of the conference have also expressed their confidence in the Chinese market despite the changing situations in other countries. They said that the vast market of China as well as its commitment to “opening up” has given them such optimism. China’s President Xi Jinping recently mentioned their country’s opening-up policies, as they will open their markets for foreign investments and economic transformation, during the second China International Import Expo (CIIE) held in Shanghai.

World leader in gases and technologies Air Liquide Greater’s CEO in China Nicolas Poirot stated in an interview that China has also become the main engine and stabilizer when it comes to global economic growth by providing a vast market. Poirot believes that the nation’s dedication in terms of opening up sent global confidence about their market and it guided the global economy to a more balanced, inclusive, and open prospect.

A Good Business Environment for Foreign-Invested Firms

The CEO has also praised how the business environment in China is improving. In the last 40 years, the nation built market-oriented reforms, created a more inclusive development model, and established a good environment for foreign enterprises. 

Japan’s Fortune 500 company Sumitomo Corporation’s chairman Kuniharu Nakamura further shares the same viewpoint. He said that aside from opening its market wider and easing its policies, it has also improved its policies on the protection of intellectual property rights.

The country’s Ministry of Commerce has also released a report at the Qingdao Multinationals Summit that in the last 27 years now, more foreign investments entered China compared with other developing nations. In 2018, there were 961,000 foreign-invested firms in China, reaching US$2.1 trillion actual use of foreign capital.

Foreign-Invested Corporations and the Chinese Economy

The Ministry of Commerce’s report also details that the foreign-invested firms have become a significant player in the economy of China as they contributed to nearly 50 percent of the nation’s foreign trade, a fifth of its tax revenue, and a quarter of its industrial output. 

In the last 40 years, the nation built market-oriented reforms, created a more inclusive development model, and established a good environment for foreign enterprises / Photo by: PierreSelim via Wikimedia Commons

 

Foreign Direct Investment

In terms of foreign direct investment, which is cross-border transaction in the form of a controlling ownership/investment in an enterprise in another country to the domestic country, China’s FDI flow measured in USD and as a share of GDP were as follows: 2011 ($48,421 million), 2012 ($64,963 million), 2013 ($72,971 million), 2014 ($123,130 million) , 2015 ($174,391 million), 2016 ($216,424 million), 2017 ($216,424 million), and 2018 ($96,472 million).

FDI and portfolio investment differ from each other. FDI is when a corporation owns another firm in a different country and portfolio investment is when companies simply invest or put their money into the assets of another country. Most economists prefer FDI because foreign companies are directly involved with the daily operations in a foreign country. This means that they don’t just put in their money but also their technology, skills, and knowledge.

When international firms come in, they have the potential to shake up the existing sector because they bring competition to domestic firms. In a way, the FDI also strengthens the local economy as they improve government tax revenues and create new jobs.