Foreign Enterprises' Sustained Investment in China

In the evolving global economic landscape, China is increasingly becoming a favored destination for foreign investment. The continuous decision of numerous foreign enterprises to increase their investment in China not only reflects the strong attractiveness of the Chinese market but also injects new vitality into the development of both China's and the global economy.

Current Status and Trends of Foreign Enterprises' Investment in China

In recent years, the scale of foreign enterprises' investment in China has been continuously expanding, and the investment scope has become increasingly diverse. In 2024, 59,000 new foreign-invested enterprises were established in China, representing a year-on-year increase of 9.9%. Over the past five years, the average return on direct investment by foreign companies in China has been around 9%, ranking among the highest globally. In the first four months of this year, more than 18,000 new foreign-invested enterprises were established nationwide. The actual use of foreign capital in e-commerce services, aerospace vehicle and equipment manufacturing, and chemical pharmaceutical manufacturing increased by over 50%.

In terms of investment areas, foreign investment is shifting from traditional manufacturing to high-tech sectors such as new energy, intelligent manufacturing, and healthcare. For example, Roche, a multinational pharmaceutical company, announced an investment of 2.04 billion yuan to build a new production base in Shanghai. Germany's Vorwerk Group reinvested 500 million yuan in Suzhou Industrial Park to enhance the production capacity and R&D efficiency of new energy vehicle components. Siemens Healthineers invested over 1 billion yuan to build a research and development base for core magnetic resonance components in Shenzhen. Additionally, Sanofi, a French pharmaceutical giant, invested 1 billion euros to build a new insulin production base in Beijing, and Toyota Motor of Japan established a wholly-owned subsidiary in Shanghai for the R&D and production of pure electric vehicles and batteries for the Lexus brand.

Reasons for Foreign Enterprises' Sustained Investment in China

Vast Market Size and Consumption Potential

With a population of over 1.4 billion, China is the world's second-largest consumer market. As China's economy continues to develop and residents' income levels rise, the consumer market shows strong growth momentum. New consumption formats and models are constantly emerging, continuously unleashing market potential. For instance, in 2023, Apple's sales in China accounted for 17% of its global total, highlighting the importance of the Chinese market to the company. For many foreign enterprises, the Chinese market offers extensive development opportunities. Whether it is high-end luxury goods or daily consumer products, a large consumer base can be found in China.

Complete Industrial System and Supply Chain Advantages

China boasts an independent and comprehensive modern industrial system and is a global manufacturing powerhouse, accounting for 30% of global manufacturing value-added. In terms of supporting factories, infrastructure construction, and network coverage, China's supply chain has unshakable advantages. For example, Apple and Foxconn once attempted to transfer production capacity to India. However, due to incomplete local supporting facilities and uneven quality of workers, the product qualification rate was too low, and ultimately the Chinese market had to be given renewed attention. China can quickly mobilize a large number of highly skilled workers and rapidly restore and increase production capacity, which is difficult to replicate in other countries. Moreover, China's stable and reliable supply chain provides solid support for the production and R&D of foreign enterprises, enabling them to carry out production and operation activities efficiently.

Abundant Human Resources and Talent Pool

China has a large reserve of industrial workers with rich and high-quality labor resources. Continuous investment in education has cultivated a large number of professional and technical talents as well as high-quality management personnel. This provides abundant human resource support for foreign enterprises, allowing them to find various types of talents suitable for their development in China, reducing labor costs and training expenses. In the field of technology, for example, China has trained many scientific research talents, providing strong support for foreign enterprises to conduct R&D activities in China and helping them with technological innovation and product upgrades.

Continuously Optimized Business Environment

The Chinese government attaches great importance to optimizing the business environment, striving to create a world-class international business environment that provides strong support for the operations of foreign enterprises. The government continuously strengthens intellectual property protection and cracks down on infringement, providing a safer and more stable investment environment for foreign enterprises. A series of policy measures have been introduced to simplify administrative approval processes, improve government service efficiency, and reduce institutional transaction costs for foreign enterprises. This year's "2025 Action Plan for Stabilizing Foreign Investment" promotes the independent opening up of sectors such as telecommunications, healthcare, and education, encourages foreign investment in equity investment in China, and will revise and expand the "Catalogue of Industries Encouraged for Foreign Investment" to accelerate the implementation of major landmark foreign investment projects, further enhancing the attractiveness of the Chinese market to foreign enterprises.

Booming Emerging Industries and Innovation Opportunities

China has developed rapidly in emerging industries such as new energy, automation, artificial intelligence, 5G, and quantum computing, ranking at the forefront globally. The development of these emerging industries provides broad innovation spaces and cooperation opportunities for foreign enterprises. By investing in China's emerging industries, foreign companies can share the development achievements in these fields, access new technologies and market opportunities, and enhance their competitiveness with the help of China's innovation ecosystem. For example, Volkswagen's cooperation with XPENG, a Chinese new energy vehicle manufacturer, has not only deeply integrated into China's new energy vehicle industry but also achieved new breakthroughs in high-tech areas such as intelligence and green technology.

Impacts of Foreign Enterprises' Sustained Investment in China

Impacts on the Chinese Economy

Promoting Economic Growth

The influx of foreign capital brings a large amount of funds for China's economic development, making up for the shortage of domestic construction funds. Foreign enterprises drive the development of related industries through investment in factories and expansion of production scale, promoting the coordinated development of upstream and downstream industries in the industrial chain, thus driving China's economic growth. For example, foreign investment in the manufacturing sector has improved China's manufacturing production capacity and technical level, promoted manufacturing exports, and made important contributions to China's economic growth.

Driving Technological Progress and Innovation

Foreign enterprises bring advanced technologies and management experience. Through technology transfer and collaborative R&D, they promote the technological progress and innovation capabilities of Chinese enterprises. Foreign companies setting up R&D centers in China and cooperating with domestic universities and research institutions have trained a group of high-quality scientific research talents, driving technological innovation and industrial upgrading in related fields in China. Siemens Healthineers' construction of a magnetic resonance core component R&D base in Shenzhen will help improve China's technical level and innovation capabilities in the medical device field.

Increasing Employment Opportunities

When foreign enterprises invest in factories and expand production scale in China, they need to recruit a large number of employees, including production workers, technical personnel, and management staff, providing abundant employment opportunities in China. This not only eases employment pressure but also increases workers' income levels, promoting social stability. Statistics show that foreign enterprises have directly and indirectly created a large number of jobs in China, playing an important role in stabilizing and developing the Chinese job market.

Optimizing the Industrial Structure

The shift of foreign investment from traditional manufacturing to high-tech sectors such as new energy, intelligent manufacturing, and healthcare helps promote the optimization and upgrading of China's industrial structure. Foreign investment in high-tech fields drives the development of related industries, increases the proportion of high-tech industries in the national economy, and promotes the transformation of China's economy towards high-quality development. Sanofi's construction of an insulin production base in Beijing and ArcelorMittal's investment in building a global R&D center for automotive steel in Hunan help enhance China's industrial competitiveness in the pharmaceutical and steel fields, respectively, and promote the transformation of the industrial structure towards high-end, intelligent, and green directions.

Impacts on the Global Economy

Driving Global Economic Growth

As the world's second-largest economy, China's stable economic growth, facilitated by the continuous investment of foreign enterprises, contributes to global economic growth. The expansion of the Chinese market and the increase in consumption capacity also provide a broader market space for global enterprises, promoting global trade and investment. The rapid development of China's automotive market has not only driven the prosperity of the domestic automotive industry but also created huge market demand for global automotive component suppliers, driving the development of the global automotive industry chain.

Promoting the Stability of Global Industrial and Supply Chains

China occupies an important position in the global industrial and supply chains. The investment and production activities of foreign enterprises in China strengthen China's connection with the global industrial and supply chains. Foreign enterprises, leveraging China's industrial advantages and supply chain supporting capabilities, use China as a global production base and R&D center, which helps stabilize global industrial and supply chains and improves global resource allocation efficiency. During the COVID-19 pandemic and other factors that disrupted industrial and supply chains, China's stable production capacity and supply chain system provided important support for global enterprises, ensuring the stable operation of global industrial and supply chains.

Promoting International Cooperation and Exchanges

The continuous investment of foreign enterprises in China promotes cooperation and exchanges between Chinese and foreign enterprises, driving the flow of factors such as technology, talent, and management experience on a global scale. Such international cooperation and exchanges help break down trade barriers and technological blockades, promoting the openness and integration of the global economy. The cooperation between Volkswagen and XPENG not only achieved mutual complementarity in technology and the market but also provided new ideas and models for the development of global automotive industry cooperation.

Future Outlook

With the continuous development of China's economy and the continuous improvement of its opening-up level, the prospects for foreign enterprises to invest in China are promising. In the future, China will continue to deepen reforms, expand opening up, continuously optimize the business environment, and strengthen intellectual property protection, providing better services and a more stable investment environment for foreign enterprises. China will further promote industrial upgrading and accelerate the development of emerging industries, providing more investment opportunities and innovation spaces for foreign enterprises.

Against the backdrop of numerous uncertainties and challenges in the global economy, as a stabilizer and growth engine of the global economy, China will continue to attract the attention and investment of foreign enterprises. Foreign enterprises will also share the opportunities of China's high-quality economic development through continuous investment, achieve their own development and growth, and jointly write a new chapter of win-win cooperation with China, making greater contributions to the stability and development of the global economy.

The continuous investment of foreign enterprises in China is a win-win choice. With its own advantages, China provides broad development space and a good investment environment for foreign enterprises, while the investment of foreign enterprises makes important contributions to the development of China's economy and the stability of the global economy. In the future, it is believed that foreign enterprises and China will continue to work hand in hand to jointly promote the global economy towards a more prosperous and stable future.