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The View | Not all foreign companies in China want to leave, some are doubling down on investments
- China remains globally important not only as a base for manufacturing, but increasingly for its strengths in research and innovation
- Foreign firms know this, and despite their frustration at China’s zero-Covid policy, many are not seriously considering leaving the country
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The view that foreign companies are not investing in China any more and that those who have are leaving seems to be persisting.
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The proportion of EU companies considering moving current or planned investments out of China more than doubled to 23 per cent between January and May, according to a survey by the EU Chamber of Commerce in China. The principal reasons include China’s Covid-19 policy and the Russia-Ukraine war, besides major logistics challenges.
In the same period, US companies reported lower production due to an inadequate workforce and input supply constraints.
However, recent inward foreign direct investment data tells a different story. Between January and August, actual inflow of FDI in China rose 16.4 per cent year on year to US$138.41 billion, while exports were up 7.1 per cent at US$314.92 billion.
Major auto companies are doubling down on China. Volkswagen has announced plans to invest US$2.3 billion in a joint venture to build best-in-class autonomous driving capabilities. BMW has invested US$2.2 billion in a new electric vehicles plant in Shenyang and is reportedly going to move production of its electric minis from the UK to China. Tesla is mulling a second “Gigafactory” in Shanghai and Ford is incorporating a new company for electric vehicles in China.
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Elsewhere, German chemicals giant BASF has commenced production in Guangdong, and a further investment of about 10 billion euros (US$9.5 billion) in heavy chemicals is expected by 2030.
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