Economic Hot Topics Q&A|Why do people feel “inseparable” and “reluctant” to leave the Chinese market?

Economic Hot Topics Q&A|Why do people feel “inseparable” and “reluctant” to leave the Chinese market?

Xinhua News Agency, Beijing, February 11

Question: Why do people feel “inseparable” and “reluctant” to leave the Chinese market?

Xinhua News Agency reporter

At the end of the year and the beginning of the year, many multinational companies have released financial reports one after another, announcing their performance in the Chinese market, affirming the important position of the Chinese market in their global business landscape. At the same time, some Western institutions and media frequently denigrate the Chinese economy and even encourage multinational companies to “leave with their profits.” This creates a huge “temperature difference” between the business activities and actual feelings of multinational companies in China.

Is it profitable to do business in China? Do most multinational companies plan to take profits or continue to deepen their cultivation? Why does the international business community oppose “decoupling”? With these questions, let us find out.

The night view of Jintan Oriental Salt Lake City in Changzhou, Jiangsu Province at the foot of Maoshan Mountain (photo taken on December 22, 2023, drone photo).Photo by Xinhua News Agency reporter Ji Chunpeng

Reluctant to give up market opportunities

“China is not only a key market, but also an important fertile ground for talent and innovation, which is crucial to the global competitiveness of American companies.” Tan Sen, chairman of the American Chamber of Commerce in China, said in a report recently released by the organization. The report shows that in 2024, about half of the companies surveyed will maintain the same investment scale in China, and nearly 40% plan to increase capital in China. Viewing the Chinese market as the strategic focus of the company and being optimistic about China’s rapid economic growth are their primary considerations for capital increase.

Judging from this report, American companies in China do not believe some Western media’s doubts about China’s economic growth potential. Xinhua News Agency reporters learned from interviews that many US companies such as Honeywell and Corning made positive progress in multiple Chinese businesses last year.

Recently released financial reports of relevant companies show that multinational companies have a solid foundation for their optimism about the Chinese market, and China’s attractiveness as an investment destination has not changed. In fiscal year 2023, L’Oreal and Bosch Group’s sales in China both grew by more than 5%, and Apple’s Greater China revenue accounted for about one-fifth of the company’s total revenue. Starbucks also achieved impressive growth in the first quarter of fiscal year 2024, with a net increase of 169 stores in the Chinese mainland market.

On January 9, 2024, tourists played on Central Street, a century-old street in Harbin (drone photo).Photo by Xinhua News Agency reporter Zhang Tao

Yum China, which owns well-known catering brands such as KFC and Pizza Hut, recently announced its financial report showing that the company’s total revenue last year increased by 15% compared with the previous year; it opened 1,697 net new stores, exceeding its full-year net new store target. Yum China CEO Tracy Wat said the company is very optimistic about the vast growth opportunities in the Chinese market and will continue to expand its target markets in the future to meet the needs brought about by long-term consumption upgrades in these regions and take root in China.

James James, chairman and CEO of Procter & Gamble, said in a conference call announcing the financial report that his recent visit to China and his experience of meeting local employees and consumers convinced him that the company would have opportunities to continue to expand its business in China in the next few years.

Sergi Basco, a Spanish economist and associate professor of economics at the University of Barcelona, ​​said that China, as a market with sufficient domestic demand, has great appeal to European companies. As consumption increases and domestic demand expands, more foreign companies will enter the Chinese market.

“Like a fish drinking water, you know whether you are warm or cold.” While some Western institutions and media are racking their brains to discredit the “whole words” of China’s economy, the global business community is gathering in China, busy creating cooperation opportunities and seizing market opportunities.

In the Li Auto Changzhou base workshop in Changzhou City, Jiangsu Province, a robotic arm performs welding operations (photographed on January 10, 2024).Photo by Xinhua News Agency reporter Ji Chunpeng

Reluctant to give up opportunities for growth

“China is not only an important market for the Bosch Group, but also an innovation and R&D base.” Bosch China President Xu Daquan recently told Xinhua News Agency reporters that smart travel business is the main growth driver of the Bosch Group’s business in China. The Bosch Group has nearly 58,000 employees in China and its performance has maintained steady growth. The company, which ranks among the world’s top 500 companies, said it will continue to invest in China to enhance its manufacturing and R&D capabilities.

For multinational companies, China has a superior innovation environment and talent pool. In addition, constantly iterating business application scenarios, developed digital economy and active market competition have brought unique growth opportunities to multinational companies.

In McDonald’s China restaurant warehouse, staff only need to wave their mobile terminals and scan the electronic labels of goods packaging to complete the inventory work, and transmit the data in real time through cloud computing and data engines.

McDonald’s China CEO Zhang Jiayin told Xinhua News Agency that McDonald’s China currently leads the McDonald’s global market in new store development, digital transformation, and delivery business. This is due to companies embracing the digital transformation of China’s business models.

This is a hydrogen energy subway construction work vehicle developed by China Railway Wuhan Electrification Bureau, taken on July 18, 2023.Photo by Xinhua News Agency reporter Xiao Yijiu

In recent years, China has continued to promote green and low-carbon transformation and vigorously developed new energy industries. The export scale of the “three new” foreign trade products such as electric passenger vehicles, lithium-ion batteries and solar batteries has grown rapidly, providing many multinational companies with growth opportunities based on innovation and competition.

Tetsuro Honma, global vice president of Panasonic Holdings Group, said that while China maintains its status as a manufacturing power, it is gradually becoming a consumer and innovation power. The fiercely competitive Chinese market has become an ideal training ground for honing the competitiveness of foreign-funded enterprises. The growth opportunities brought about by this kind of competition are exactly what no company is willing to give up.

In 2023, the German Volkswagen Group will settle its largest R&D center outside its German headquarters in Hefei. Bertrand, chairman and CEO of Volkswagen Group (China), said that Volkswagen is fully integrating into China’s industrial ecology. In a dynamic market environment, rapid development is the key to maintaining competitiveness.

Ni Yili, chairman of McKinsey China, told reporters that in terms of market size, consumption power and innovation potential, almost no other region in the world can replace the Chinese market. For enterprises, the Chinese market can inspire inspiration in the consumer field and become an innovation base for enterprises.

This is the container terminal in Jingtang Port Area of ​​Tangshan Port taken on February 7, 2024 (drone photo).Photo by Xinhua News Agency reporter Yang Shiyao

Reluctant to give up supply chain advantages

China is the only country that has all industrial categories in the United Nations industrial classification. It has a very large market and is in the stage of rapid demand release. Its strong supply chain advantages make many multinational companies unable to give up.

“The Chinese market is difficult to replace.” The McKinsey Global Institute in the United States pointed out in a recently released report that although the current restrictions on global trade have increased, China’s advantages in the global supply chain cannot truly be replaced.

In the supply chain of Apple in the United States, China is one of its important production bases. At the first China International Supply Chain Promotion Expo held in November last year, Apple wrote on its booth display board: “151 of Apple’s 200 major suppliers produce in China.”

This slogan reveals China’s pivotal position in the global supply chain from one aspect, and also shows that the cost of “decoupling” from China is indeed an “unbearable burden” for enterprises.

On December 22, 2023, in Tesla’s Shanghai Gigafactory, workers were inspecting the paint and doors and windows of vehicles before leaving the factory.Photo by Xinhua News Agency reporter Fang?

A car rolls off the assembly line in less than 40 seconds! For the American electric car manufacturer Tesla, the Shanghai Gigafactory has become its global export center, and its efficiency is firmly among the forefront of its peers. Also located in Shanghai, Tesla’s first energy storage super factory project outside the United States is also scheduled to be put into production within this year.

“Tesla’s Shanghai Gigafactory can achieve such high efficiency, which is inseparable from the company’s deep integration with China’s supply chain.” said Tao Lin, vice president of Tesla.

Several experts from the Deutsche Bundesbank recently wrote that in the long run, leaving China will bring significant commercial and economic costs to German companies. German companies will miss out on the “main sales market” of China, and many supply chains will have to be restructured at the expense of efficiency. (Participating reporters: Ma Zegang, Deng Qian, Xu Jiatong, Wang Jiawei, Liu Chunyan, Zhong Ya, Chen Binjie, Kang Yi, Chen Wenxian, Wu Xiaoling, Du Juan, Xu Feng, Hu Zunyuan, Shan Weiyi, Xie Yuzhi)

【Error correction】

[Editor in charge: Zhang Qiaosu]


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