Published: 17:45, June 13, 2024
MNCs seek fresh growth points
By Zhong Nan

Foreign firms look to benefit from China’s green push and advancement of high-end manufacturing

A view of the booth of Schneider Electric SE during an expo in Shanghai. (PROVIDED TO CHINA DAILY)

Covestro AG, a German chemicals manufacturer, is setting up a new plant in Zhuhai, Guangdong province; Schneider Electric SE, a French industrial conglomerate, will build an industrial park in Xiamen, Fujian province; and Bridgestone Corp, a Japanese tire company, has announced it will invest 562 million yuan ($77.6 million) in China over the next three years.

These seemingly unconnected corporate developments have one thing in common: they represent a trend of multinational corporations (MNCs) seeking fresh growth points in China’s green transformation and rapid development of its high-end manufacturing sector.

Against the backdrop of global economic uncertainties, the idea of secure and sustainable investments has gained traction worldwide. MNCs, particularly those dealing in high-end materials, industrial parts and components, and green-related industries, are prioritizing long-term returns.

To this end, they are setting up more innovation centers and advanced factories in China to sustain competitiveness and navigate future challenges.

For example, Marelli Holdings Co Ltd, an Italian-Japanese mobility product supplier to the automotive industry, will expand its engineering team in China from 800 to 1,000 soon to meet surging demand for innovation.

David Slump, the group’s president and CEO, said Marelli will ride China’s electric vehicle (EV) wave by supplying products ranging from automotive lighting and electronics to software solutions to its partners in the country.

Dismissing some Western nations’ “China overcapacity” narrative, especially in the areas of new energy industries, Slump said that China, recognized globally as a major EV market and home to some of the world’s leading EV manufacturers, will create substantial opportunities for global companies aiming to sustain robust growth in this burgeoning sector.

Eager to cut carbon emissions, many countries are building infrastructure like charging facilities, battery swap stations, and capable grid systems to facilitate their consumers driving EVs on the road, he said.

With around 50,000 employees and 170 plants and research and development (R&D) centers across the world, Marelli also ships products manufactured at its plants in China to other parts of the world, including Mexico, Thailand, and Germany.

Covestro CEO Markus Steilemann said he opposes the “China has overcapacity” narrative and is not a fan of excessive regulations, especially in markets where free trade is essential.

Excessively prohibitive measures and restrictions may not effectively boost productivity, and criticizing perceived overcapacity is not the right way to global cooperation, said Steilemann, adding that about 75 percent of Covestro’s planned investment in the Asia-Pacific region will be in China over the next three years.

Without revealing the specific investment figure, the German executive said that Covestro is currently building a plant to make thermoplastic polyurethanes in Zhuhai, with an annual production capacity of 120,000 metric tons by 2033.

A booth showcasing the work of Marelli Holdings Co Ltd during an industry expo in Shanghai. (PROVIDED TO CHINA DAILY)

Pan Yuanyuan, an associate researcher at the Chinese Academy of Social Sciences’ Institute of World Economics and Politics, said China’s abundance of innovative application scenarios, supported by favorable policies and a flourishing market, will remain attractive for global investors.

China will continue to present “enticing investment opportunities, especially in emerging industries and (involving) innovative business formats”, said Pan.

The latest data from the Ministry of Commerce showed that high-tech manufacturing sector attracted 12.5 percent of the foreign direct investment inflows into China in the first quarter of this year, up 2.2 percentage points year-on-year.

Following China’s announcement that it has lifted all restrictions on foreign investment in the manufacturing sector and implemented measures to ensure equal treatment for foreign-funded companies, the number of newly established foreign-invested firms in the country reached 12,000 in the first quarter of this year, up 20.7 percent from a year earlier.

Despite increasing uncertainties, including geopolitics and protectionist steps taken by certain developed countries, Jin Zhuanglong, minister of industry and information technology, said that efforts will be intensified to support foreign businesses in establishing R&D centers in China.

Moreover, collaboration with Chinese companies for technological research, industrial applications, and expanding international cooperation in digital transformation, as well as green and low-carbon development of the manufacturing sector, will be prioritized, he said.

These policy measures will create favorable conditions for overseas businesses to participate in the development of China’s new quality productive forces, said Zhu Bing, director-general of the Department of Foreign Investment Administration in the Ministry of Commerce.

New quality productive forces represent advanced productivity freed from traditional economic growth modes and productivity development paths. They feature high-tech, high efficiency, and high quality, and are in line with the new development philosophy.

Highlighting that the concept of new quality productive forces is fully in line with Schneider Electric’s growth strategy, Yin Zheng, its executive vice-president of China and East Asia operations, said the company will strengthen its “China Hub” strategy this year in all aspects, including talent, innovation, supply chains, and ecosystem development.

Apart from the announcement about constructing an industrial park in Xiamen to manufacture medium voltage equipment, the French firm plans to initiate the second phase of its electric power experimental innovation project in Shanghai later this year. This move aims to further enhance Schneider Electric’s local innovation footprint in China.

Vincent Bruneau, Schneider Electric’s vice-president for global supply chain (China), said this new Xiamen industrial park will become a major R&D center, manufacturing and supply hub for Rueil-Malmaison, a France-headquartered group, to supply medium voltage equipment to both the Chinese and global markets. This facility is scheduled to start operations in 2025.

German chemicals manufacturer Covestro AG displays its green solutions at an expo in Shanghai. PROVIDED TO CHINA DAILY)

Riding the boom in China’s automobile production, tire giant Bridgestone announced in early April that it will invest 562 million yuan in the country over the next three years.

This investment will focus on strengthening production base construction and enhancing the proportion of high-performance passenger car tire production. It will aim to better meet the diverse demands of the Chinese consumer market by offering more high-end and diversified products and services, said Agustin Pedroni, president and CEO of Bridgestone (China) Investment Co Ltd.

The Japanese company plans to invest $26 million in its tire factory in Wuxi, Jiangsu province, this year, expanding high-end passenger car tire production capacity to facilitate comprehensive enhancement and development of the factory.

Bridgestone’s investment moves seem justified, given that China’s auto sales rose 10.6 percent year-on-year to 6.72 million units in the first quarter of this year. The country’s vehicle exports rose 33.2 percent year-on-year to over 1.32 million units, according to the Beijing-based China Association of Automobile Manufacturers.

China’s comprehensive industrial system and its efficient logistics network position the country as an ideal supplier, said Wang Xiaohong, a researcher specializing in cross-border investment at the China Center for International Economic Exchanges in Beijing.

“Whether it is simple components, intricate machinery, raw materials, or high-tech products, foreign investors can effortlessly find and acquire everything they require,” said Wang.

Foreign-invested enterprises’ imports and exports amounted to 4.02 trillion yuan in China in the first four months, declining 0.7 percent year-on-year, accounting for 29.1 percent of the country’s total foreign trade value, data from the General Administration of Customs showed.

During this period, global and domestic companies in China exported 4.62 trillion yuan worth of mechanical and electrical products such as EVs, integrated circuits, and smartphones, up 6.9 percent year-on-year, accounting for 59.2 percent of the country’s total export value.

Emphasizing that global companies in China are making substantial commitments to localization, engaging with diverse stakeholders, increasing investments and embracing emerging business models, Mohammed Al Ajlan, chairman of the Saudi-Chinese Business Council, said the Chinese market will continue to showcase distinctive features, especially in consumption trends and technology adoption.

To attract more foreign capital, China introduced in late April a targeted set of policy measures to facilitate investment by overseas institutions in Chinese technology-oriented companies.

This policy is designed to better accommodate the needs of overseas institutions, which seek enhanced stability and predictability in the business environment, along with expanded investment channels, smoother exit pathways, and easier access to tax benefits, according to information released by the Ministry of Commerce.