Stringent anti-epidemic measures adopted in some key Chinese cities including Shanghai and Beijing, in hopes of curbing the rapid spread Omicron variant and bringing back sound bounce after a temporary economic shock, may inevitably hurt some foreign firms’ performance, yet some Western media outlets are exaggerating the situation, hyping the “investor flight” theory, warning that such measures will result in a large-scale retreat of foreign firms and undermine China’s attractiveness in the long run, which Chinese experts and industry players have dismissed.
The “ditch China” claim has been refuted by many foreign firms and industry players, who reasserted their confidence in the world’s second-largest economy and its key role in the global industrial chain, and also appreciated the government’s efforts of striking a balance between epidemic control and work resumption.
Observers and experts are also calling for foreign investors to ride out the temporary difficulties together with the Chinese and the Chinese market, believing in its ability in the fight against virus, and once this round of outbreaks ebbs away, those sticking to their vision will have a lot to gain.
From a global perspective, China is still one of the world’s fastest-growing major economies and home to the world’s largest population, which are conditions attractive to many multinationals, ranging from auto companies and financial institutions, analysts said.
Still represents future
“It’s very difficult to shift in the sense of to move out of China and to take your operations out of China,”Jorg Wuttke, president of the EU Chamber of Commerce in China, told the Global Times.
“Standard Chartered is firmly optimistic about China’s long-term development prospects, and we are full of confidence in the opportunities brought about by China’s development,” the firm told the Global Times on Sunday.
The company said it will invest $300 million into China-related business in the next three years to help its clients seize opportunities arising from China’s continuous reform and opening-up.
Texas Instruments Semiconductor Technologies also denied reports saying it is about lay off staff in China in a Sunday-released announcement, stressing that China is still its “most important global market.”
Tesla is confident about China’s development, and the epidemic was just a temporary test and challenge, Vice President Tao Lin was quoted as saying by domestic media on Sunday. “We’ve also seen the ability of all walks of life to cope with challenges from the process of resumption of work, and believe that [production] will soon return to normal.”
Tesla, the US electric carmaker, although suffering disruptions in the latest outbreak in Shanghai, generated $4.65 billion in China in the first quarter of 2022, a year-on-year increase of 52.8 percent. China is now Tesla’s second-largest market, accounting for 24.8 percent of the company’s revenue.
Also refuting the “investor flight” claim is official data, showing that foreign direct investment flowing into China rose by 25.6 percent to 379.87 billion yuan ($59.09 billion) year-on-year in the first quarter of this year.
A survey conducted by the China Council for the Promotion of International Trade on foreign companies’ degree of satisfaction of China’s policies shows that 86 percent of the surveyed enterprises were satisfied with China’s foreign investment stabilization policy.
“There are also indeed political motives behind the spread of the ditching China theory, especially during the current Russia-Ukraine conflict,” He Weiwen, former economic and commercial counselor at Chinese Consulate General in San Francisco and New York, and senior fellow of China and Globalization, told the Global Times on Sunday.
The US wants to take this opportunity to block China from the global supply chain, restructure the current global economy distribution and establish “small cliques” in the economic sector to curb China’s rise, He said.
Support from the govt
The ferocious Omicron flare-up has indeed caused great challenges to foreign businesses in China since March, as Starbucks, Apple and other major US-listed companies have warned in quarterly earnings reports of the negative impact of current outbreaks to their businesses.
For instance, Starbucks said same-store sales in China fell by 23 percent in the quarter ending April 3 from the same quarter last year. That is far worse than the 0.2 percent increase analysts expected, according to FactSet.
But the coffeehouse chain said it still expected its China business to be bigger than the US in the long term.
Apple said the epidemic restrictions would likely hit sales in the current quarter by $4 billion to $8 billion – “substantially” more than in the last quarter. The other factor is ongoing chip shortages, CNBC reported, citing management as saying on an April 28 earnings call.
Chinese authorities, while fully aware of the situation, have been working on the situation over the past weeks. Foreign firms are also on the very first batch of lists with government support to encourage work resumption.
China’s Ministry of Commerce (MOFCOM) said on April 21 that it will go all-out in further coordinating and solving difficulties, including transportation snags and production and operation resumption issues, that foreign-funded firms have encountered in China while ensuring effective epidemic control.
Specific efforts, including smoothing transportation channels, optimizing epidemic prevention and control measures, organizing and ensuring emergency and key supplies, have been carried out.
In a recent meeting between Commerce Minister Wang Wentao and foreign business representatives in China, issues on the supply chain disruption posed by the epidemic were also being addressed as part of the Chinese government’s active response to foreign business concerns.
China’s key role in supply chains, and its interconnected relations and labor distributions with other major economies in the world will be a source of attractiveness for foreign firms for a relatively longer time, He Weiwen said, noting that the attractiveness will not be fundamentally undermined by short-term disruptions.
Companies are also eyeing new opportunities such as the digital economy, which also represent a path to their future growth. Yu Feng, President of Honeywell China, told the Global Times on Sunday that the low-carbon and digital economy have brought it “broad prospects” for development.
But China’s advantage still lies in manufacturing medium and low-end products, He Weiwen said, noting that China has to strengthen its role in high-end manufacturing as soon as possible, though there would be “extreme challenges before China can make it.”