Why Foreign Firms Say They 'Must Stay in China'?

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Editor's Note: 

As the Chinese economy, along with the entire global economy, has been facing considerable challenges in recent years, some Western officials and media outlets have stepped up their long-standing smear campaign against the world's second-largest economy. They cherry-pick information and even distort facts to hype various specious narratives such as "Peak China," while turn a blind eye to China's considerable strengths and vast potential. 

In order to set the record straight, the Global Times is launching a multimedia project, which will include in-depth articles, objective analysis, and visual arts, to present a large, comprehensive and true picture of the Chinese economy. Our reporters will travel across the country from the old industrial base in Northeast China to the burgeoning Greater Bay Area in South China. They will document new development trends, new business models and new growth drivers, in order to demonstrate China's economic strengths and its vast potential. This is the second installation of the series, focusing on the foreign companies in Wuxi. 

Starting years ago, every once in a while, Western countries would habitually hype that China was "struggling" to attract foreign investment, although official data has repeatedly showed that China remains as a top investment destination, and China's economy has become an important engine and stabilizing force for global economic growth.

During recent visits to several foreign companies in Wuxi, Global Times reporters found that foreign firms continue to view China as a favored investment destination, driven by the country's steadfast commitment to opening-up. The claims of "foreign capital leaving China" turns out to be simply groundless. Eyeing enormous market opportunities, those executives said "wise people will continue to choose the Chinese market."

An employee of Tehmag Zeelandia unloads baking ingredient in Wuxi, East China's Jiangsu Province on April 18, 2024. Photo: Tu Lei/GT

Flocking to China 

It takes less than four hours to arrive Wuxi East Railway Station after boarding G27 high-speed train from Beijing South Railway Station.

Official data showed that Wuxi,a city in the Yangtze River Delta region, acknowledged as one of the powerful engines of China's opening-up endeavor, is home to more than 7,200 foreign companies including 222 companies backed by 110 Fortune 500 companies. 

TLD Asia (Wuxi) Ltd is one of them. Founded in 2008 in Wuxi, the company mainly produces ground support equipment such as aircraft tractors, cargo lifting platforms, baggage tractors and sewage treatment trucks, with customers including airlines, airports and ground handling services providers.

"Our products made in Wuxi and Shanghai are available everywhere that is home to airlines or airports," Wu Jianqiang, chief operating officer of company, told the Global Times. 

Wu explained that the French-based TLD entered into China in 1997 in Shanghai, and the executives of the company found the plant in Shanghai could not meet the demand after years' development, so they set up the Wuxi factory.

US-based manufacturing giant Jabil Inc followed a similar path.

The company launched its businesses in Guangzhou in South China's Guangdong Province and Shanghai in the 1990s, and expanded to new cities as its businesses grew. Wuxi became a clear choice on the back of supportive policies put in place by the local Wuxi government, according to Xiao Yong, general manager of Jabil Circuit (Wuxi) Co, a subsidiary of Jabil Inc.

Wuxi was chosen not only for its supportive policies, but also for the cluster effect the city has formed. Lots of companies in the list of Fortune 500 Companies had also established a presence here, Xiao said. 

Currently, the company has more than 50,000 employees across 13 factories in China.

Expansion is common to see in tandem with China's reform and opening-up over the past 40 years. Data showed that multinational companies remain optimistic about the development opportunities offered by the China market.

Statistics from the Chinese Ministry of Commerce showed that from January to February this year, the number of newly established foreign-invested enterprises reached 7,160, a year-on-year increase of 34.9 percent, representing the highest level over the past five years.

A report released in January by the German Chamber of Commerce in China revealed that more than 90 percent of the German companies surveyed planned to continue to operate in the China market, and more than half of German companies planned to increase investment in China over the next two years.

A corner of TLD Asia (Wuxi) Ltd in Wuxi, East China's Jiangsu Province on April 18, 2024 Photo: Tu Lei/GT

Fierce competition 

Chinese experts said the success of foreign companies in China has a close connection with China's talent pool and huge market size.

For example, the population of Wenzhou in East China's Zhejiang Province is about 9.76 million, which is higher than the population of some European countries such as Hungary, Austria and Switzerland. Foreign companies continue to explore more opportunities in China's second- and third-tier and even smaller cities, Chen Fengying, an economist and former director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, told the Global Times. 

Foreign enterprises have faith in the entrenched advantages of the China market relating to market size, industrial support and business environment, while, the market has gradually developed into the most fiercely competitive battlefields in the world, market analysts said.

Thanks to an early investment into leading technology, we still could maintain a leading position in the industry. But now, our biggest concern is a local producer in Weihai, East China's Shandong Province, although currently its market share is less than one-third of ours, said Wu from TLD Asia (Wuxi). 

We do not take lightly the comprehensive strengths of other Chinese companies when it comes to their technological level and manufacturing capabilities which are developing very quickly, he noted. 

The cost of labor in China used to be relatively low in the past, offering a sharp comparison of the competitiveness of local enterprises and the foreign ones. But the comprehensive strength of local enterprises is increasing with the rapid development of China's industrial manufacturing and digital economy, and the competitive pressure faced by foreign enterprises in China is naturally increasing, Cao Heping, an economist at Peking University told the Global Times.

"This is the inevitable outcome of the development of China's market economy," Cao said. 

Foreign competitors continue to invest heavily in technological innovation too. 

Wu said that it has become an urgent priority to develop unmanned driving and unmanned operations to address a shortage of manpower following the COVID-19 epidemic.

When transporting cargo to the cabin, the cargo loader and cargo should get as close to the cabin door as possible but must not hit the cabin door, otherwise the aircraft will be damaged. In the past, skilled workers were required to be present, but now an automatic safe approach system independently developed by the company is used instead, Wu explained. 

Competition in China has made us run faster than our European and North American peers. To a certain extent, it is our companies in China that are driving the French group moving forward, Wu said. 

A view of Jabil Circuit (Wuxi) Co, a subsidiary of Jabil Inc in Wuxi, East China's Jiangsu Province Photo: Courtesy of Jabil Circuit (Wuxi) Co

Chinese experience 

During interviews, many companies highlighted the importance of China's speed in the competition with local players.  

Zhu Daigui, deputy general manager of KACO Wuxi sealing system Co, said one of the big challenges here was to introduce a flexible sales policy that adapts to market conditions. 

KACO, a German company founded in 1914, is a manufacturer of special rubber seals. It has been providing high-end seals to global giants such as Audi, BMW and Volkswagen. In recent years, it has attracted more Chinese customers such as BYD and NIO.

In the past, the German firm would use "standardization"'to turn down the requirements to adjust the size, and I had to visit the headquarter to communicate and promise to shoulder all the responsibilities. The deals reached afterward has brought huge profit, and helped win their trust, Zhu said. 

This was not a risk, but a judgment based on comprehensive consideration of the China market and the company's technologies. Abandoning rigidity and adopting flexible strategies is a valuable experience gained in China, Zhu noted. 

"What we learn here is speed, such as dealing with problems quickly and move forward quickly. It doesn't matter even if you fail. The accumulated experience in China has helped us participate in international competition," echoed Wiekert Visser, chairman of Tehmag Zeelandia, a century-old enterprise from the Netherlands which has  deeply rooted in Wuxi's Xishan district for over 20 years.

Meanwhile, localization is an important way out. 

In June of 2023, Jabil won the 2023 Manufacturing Leadership Award issued by the National Association of Manufacturers, for an innovation of AI Automatic Visual Inspection Driven by 5G and Edge Computing, the first time for Jabil has won this honor since its establishment.

Our Wuxi factory is an innovative factory with more than 100 patents under our name and it is currently the only "mega factory" in the group that integrates R&D, prototype trial production, manufacturing and after-sales maintenance and testing service capabilities among Jabil's more than 100 factories around the world, Xiao said.

Participating in the fiercest market competition will help companies focus on technological innovation and enhance global competitiveness. 

"If you can't stay in China in the next five to seven years, it may take decades to catch up, or you may be eliminated," Cao said. 

A corner of TLD Asia (Wuxi) Ltd in Wuxi, East China's Jiangsu Province on April 18, 2024 Photo: Tu Lei/GT

Wise choice

Recently, some Western media outlets have been running reports about "foreign capital leaving China" and China's "ongoing crackdown on foreign businesses" under a so-called counter-espionage campaign. Such groundless rhetoric represents a new attempt to smear the Chinese economy. 

However, interviewees said it has become common for foreign corporate headquarters to rely on the China market to participate in global competition and the wise people will surely continue to choose the China market.

"Looking around the world, which country's market can achieve growth? China can!" said Visser, adding that the China market still has great growth potential, and discussion is ongoing how to expand more in China market.

The market share of Chinese companies in our group has increased from less than 10 percent initially to more than 20 percent, making a great contribution to the group's performance. In comparison, the share of Europe market is declining, Visser said. 

On April 14, Federal Chancellor of Germany Olaf Scholz arrived in Chongqing Municipality for a three-day official visit to China.

Scholz was accompanied by senior representatives of a number of renowned German companies, including Siemens, Bayer, Mercedes-Benz, BMW, and Zeiss. More than 5,000 German companies are operating in China, as China has been Germany's largest trading partner for many years, Xinhua News Agency reported. 

"I know that there are some remarks in the West about 'decoupling' from China, but I don't think there is any need to pay attention to it, because companies around the world put profits first, and everyone want to have a better life," Visser said.

"Wise people will continue to choose the Chinese market," he remarked.

As for Jabil, Xiao said the Wuxi factory is Jabil's largest communications production base. From the earliest 2G to the current 5G, the company is growing up with China's technology development in the past 20 years. 

"I believe that we will still have great potential in Wuxi and the China market in the future," Xiao said.