Foreign firms make changes to grab China opportunities

XIAMEN - While global downward economic pressure has put pressure on foreign companies in China, new opportunities have emerged as the Chinese market continues to open.

China was no longer the top destination for foreign investors as foreign investment in China slowed last year, according to a report released by the United Nations Conference on Trade and Development during the ongoing 19th China International Fair for Investment and Trade.

Foreign firms have felt the pinch. Nokia closed its Shanghai factory in March. Philips decided in May to stop operations at a lighting equipment branch in Shenzhen, while Samsung reportedly adjusted staffing in China.

It is not unusual for foreign companies to adjust their China business due to market changes such as labor costs and return on investment, and does not mean China is losing its appeal to foreign investors. The Chinese mainland is still the third-ranking destination for foreign investment, and many sectors, especially the service sector, offer huge investment potential for multinational companies, according to Ge Shunqi, a researcher on international investment with Nankai University.

Companies cannot do business in China the same as 20 years ago because the market has evolved, according to Harley Seyedin, president of the American Chamber of Commerce in South China, adding that China continues to offer new opportunities to foreign investors and will remain a great destination for US investors for many years to come.

The time for simple manufacturing and exports is gone, and now opportunities to tap Chinese consumption, health care, education and other sectors have arrived, Seyedin said, adding it is important to be Internet-savvy and consumer-minded.

A survey of 246 US companies operating in south China released earlier this year showed that 75.6 percent of all participants report providing goods or services to the Chinese market as their primary business focus rather than creating goods or services for export.

Since it opened up over 30 years ago, China has been the top investment destination among developing countries for 24 consecutive years, with over 850,000 foreign firms investing in China with total investment reaching $1.7 trillion.

"We have seen fewer investment barriers during the past 30 years, especially in the manufacturing sector. Foreign companies were once required to find a local partner while setting up a branch in China, but now you can set up a wholly foreign-owned company here," said Dong Huijuan, vice president with the China branch of ABB Group, a Switzerland-headquartered global technology company in power and automation.

Facing economic headwinds, China is opening its markets more quickly to attract more foreign investment and will continue to open up, the Chinese leadership vowed during the recent G20 Summit.

China's top legislature revised four laws regulating inbound investment earlier this month, with an easing of rules for foreign and Taiwanese investors looking to start businesses across China. The Ministry of Commerce also released a new set of supporting measures to promote a "negative-list" approach in approving foreign investment.

The Chinese market has been opening up in agriculture, and although investment in some areas such as vegetable oil still faces policy restrictions, the market is almost totally free to foreign investors in China's free trade zones, according to Ma Zheng, vice-president of business affairs at Cargill China.

Chinese authorities decided in late August to set up seven new free trade zones, bringing the total to 11, as China looks to replicate the success of previous trials and open the market wider. The FTZs will be launched after necessary steps are taken, without a given timetable.

"We look forward to more opening up of the agricultural sector, but of course it will be a gradual process, and we will increase investment in China by 2020 to make our accumulated investment commensurate with China' s status among global economies," Ma added.