Nokia's closure of its factory in manufacturing hub Dongguan last year is seen by naysayers on China's business environment as the tip of the iceberg in terms of foreign firms leaving China.
Look closer, however, and you may find a different story. Dongguan, at the heart of the southern Guangdong Province once dubbed the Factory of the World, serves as a barometer of changes in China's overall economy and foreign firms' sentiment in particular.
In fact, foreign-funded companies contributed more than 60 percent of Dongguan's foreign trade and industrial value-added in 2015, according to new official data. Rather than being at the crest of a supposed wave of businesses leaving China, Dongguan saw fewer foreign firms close in 2015 than in any year since 2008, said Fang Jianbo, deputy director of the city's bureau of commerce.
Some 362 foreign firms closed or moved out, reducing the total number of foreign firms there by just 3.3 percent, according to the official data. For the whole Chinese market, foreign investment inflow in 2015 climbed 6.4 percent to reach a record 126.27 billion U.S dollars.
The number of newly added foreign firms surged 11.8 percent last year to 26,575, commerce ministry data showed in January. Multinational giants are stepping up, instead of slowing down, their pace of expansion in China, with Volkswagen, Intel, Samsung and many other Fortune Global 500 companies having each newly invested over 100 million U.S. dollars over last year.
"Some foreign firms have indeed chosen to move from Dongguan, just like Nokia," Fang told Xinhua. "But it is far from being some kind of a mass evacuation, it is just that some low-end manufacturers are being ousted by better ones."
As China is restructuring its economy, foreign firms are also evolving. In addition to industrial upgrades, foreign companies in the service sector are faring better than the manufacturing ones in general, said Fan Jianping, an economist with the State Information Center.
The service industry drew 61.1 percent of China's overall foreign investment last year, ranking in first place for a fifth consecutive year among all sectors in attracting foreign investment. It dethroned manufacturing in 2011. The rapid growth of foreign investment in China's service sector not only reflects more liberal policies for their access, said Wang Xiaohong, a researcher at the China Center for International Economic Exchanges.
"It also drew an end to a phase where China had to rely on low labor costs to attract foreign investment." Foreign firms' transition in their development path is also in parallel with China's supply-side structural reform. As the government is striving to cut overcapacity in steel and coal, foreign capital inflow in traditional manufacturing sectors like steel and cement was practically non-existent in 2015.
To better secure their market share in the world's second-largest economy, multinational firms are resolute in seeking ways to revamp themselves to keep pace with China's ongoing reform and rapid growth.
More foreign firms are establishing headquarters and R&D centers in China, rather than merely the manufacturing workshops they used to set up in the old days "We think highly of the China market," said Wu Renwei, president of Johnson & Johnson China.
"We built our Asia-Pacific innovation center in China, and we are preparing to establish our global lung cancer research center in Shanghai and the world's largest pharmaceutical production base in Xi'an," Wu told Xinhua.
Latest comments