China’s welcome to foreign firms a boon for manufacturing sector
- The announcement that China will lift all restrictions on foreign participation in manufacturing shows the continued shift towards inclusiveness
- Assuming the government addresses foreign firms’ concerns, expect more high-quality foreign investment in the manufacturing sector and cooperation with Chinese companies
In the past, Western nations outsourced their manufacturing and industrial activities to China. In the 2000s, the Chinese would likely have been the first to admit China had become a large, but not necessarily a strong, manufacturing nation – at least not yet.
Along the way, China’s innovations in manufacturing and technology evolved as did its unique blend of capabilities. Basic products, such as toys and clothes, gave way to advanced goods including computers and phones as China excelled in efficiency, quality and affordability.
Apple and Tesla are just two examples of the mutual benefits of China’s opening up to international companies. While the foreign firms are rewarded with lower costs, high quality and quick turnaround, China benefits from a more robust job market while building capable clusters of supply chains and manufacturing capabilities. This has been a “win-win” approach for China and its global partners.
The decision to lift all restrictions on foreign participation in manufacturing is therefore not a single isolated action. Rather, it is part of a broader strategy for the overall development and rejuvenation of China.
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The new law could lead to an increase in conflicting legal obligations between China and foreign companies’ home jurisdictions, especially regarding corporate transparency as well as data and information flows. The law also adds travel approval requirements for specific personnel, which could bring uncertainty for foreign firms that employ these people.
Assuming Beijing moves to address the concerns of foreign manufacturers, I would expect to see more high-quality foreign investment in China’s manufacturing sector in the years to come. I also anticipate that more Chinese and foreign companies will join forces to find creative new ways to crack the code of building a new generation of truly global companies.
China’s openness to foreign investment in the manufacturing sector has the potential to herald a new era which will bring exciting innovations and capabilities that will benefit China and the rest of the world.
Edward Tse is the founder and CEO of Gao Feng Advisory Company, a strategy consulting and financial advisory company with roots in China