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Multinationals ramp up investment in China with prospects of further opening up

“In the next three to five years, Wilmar International will ramp up its investment in China by 30 billion yuan, equal to the total it has invested in the country till now,” Kuok Khoon Hong, chairman and CEO of Wilmar International, Asia’s leading agribusiness group, told state-run Economic Information Daily.

Although China’s economy is facing headwinds, quite a number of international companies like Wilmar International, Tesla, Shiseido and Wal-Mart have chosen to ramp up their investment. Through surveying the companies, the Economic Information Daily found China’s determination to further open its market has brought the multinationals hope for new development opportunities.

Over the past four decades, China’s efforts to draw foreign investment have brought breakthroughs both in quality and in quantity. In terms of quantity, the annual value of foreign investment has reached $100 billion. Nearly 540,000 foreign companies have invested a combined $2.1 trillion in China. In terms of quality, the target of foreign investment has transformed from manufacturing to service industry, which now occupies over 70 percent of the total. From “assembled in China” and “made in China” to “designed by China”, industrial upgrading is obvious.

With new policies for attracting foreign investment and opening up on their way, many executives of multinationals told the Economic Information Daily they are bullish on the Chinese market.

Over the years, China has deepened its opening to the outside world. With its ascendance to the world’s second-biggest economy, many foreign companies have also gained momentum to become world-class businesses along with China’s rapid growth.

“Wilmar International started as a small trade business in 1991, but we have grasped the unprecedented opportunities brought by China’s reform and opening up,” Kuok said. When Wilmar International was ranked into the top 300 of Fortune Global 500 List in 2009, the company was only 18 years old. Now, 55 percent of the group’s sales volume and 65 percent of its net profits comes from the Chinese market.

Kuok emphasized that Wilmar International has been a “beneficiary” of China’s reform and opening up. Over the past four decades, there has been ever-growing demand for high-quality rice, flour, oil, meat and protein food in China, bringing huge business opportunities to Wilmar.

In 1981, 60 cosmetics and soap products of Shiseido were put on shelves of nine big department stores in Beijing including the Beijing Friendship Store and Beijing Hotel, signaling Shiseido’s first entry into the Chinese market.

“Shiseido has high expectations from the Chinese market, not only because 20 percent of our sales are from the market, but China’s innovation in products and business models could facilitate our expansion into the global market,” Kentaro Fujiwara told the Economic Information Daily.

Wilmar International and Shiseido represent the tens of thousands of foreign businesses which have benefited considerably from China’s economic growth. Meanwhile, the 540,000 foreign companies now operating in China help accomplish 10 percent of urban employment, 20 percent of fiscal revenue and nearly half of the country’s imports and exports.

Overall, China’s way of using foreign investment has led to a win-win situation. “While multinationals make use of China’s labor resources, production factors and huge market, China gets to benefit from the big foreign companies’ capital, technology and management experience,” Liang Guoyong, an economic affairs official with the United Nations Conference on Trade and Development, said.

The blueprint for the next round of opening up has been drafted. This April, at the Boao Forum for Asia, China laid out a clearer timetable for opening its financial sector to more foreign investment, in a clear sign of its commitment to deepening the opening up to the outside world.

To further ease market access, the nationwide practice of pre-establishment national treatment and negative list on foreign investment will be improved, said a circular released by the State Council, China’s cabinet, this June.

Since this year, China has sped up efforts to tangibly open up the financial sector. On November 25, China’s banking regulator has approved German insurer Allianz to set up a wholly owned insurance holding company in Shanghai next year.

According to Liang Guoyong, it’s natural for China to optimize its structure for attracting quality foreign investment as it seeks to transition from high-speed to high-quality economic growth.

The article is translated and edited from a Economic Information Daily news story. 


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