China is rolling out the red carpet to attract foreign officials

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This photo shows the Foxconn factory in Zhengzhou city on September 4, 2021.

Vcg | China Visual Group | Getty Images

BEIJING – China is pulling out all the stops to keep multinational companies like Apple and its supplier Fox in the country.

Such efforts to attract foreign investment come as the pandemic and geopolitical tensions push companies to diversify their supply chains away from China.

For the first time in 25 years, the American Chamber of Commerce in China found that less than half of respondents to its annual survey identified China as a top three investment priority. The number of companies considering or starting to move their manufacturing and supply outside China rose 10 percentage points from a year ago, the survey found.

The majority of respondents do not intend to move their supply chains, the AmCam report said.

The survey was conducted last fall, and the results had not changed significantly since China ended its strict Covid controls, AmCham said. China’s Ministry of Commerce did not respond to a request for comment.

After such a reduction in sentiment, China is working hard to keep foreign businesses investing – and supporting domestic growth. The Ministry of Commerce said on Thursday that it would, for the first time, launch events for the “Year of Investment in China”.

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In a sign of how hard local governments are trying to attract foreign dollars, top officials from central China’s Henan province gave Foxconn Chairman Young Liu a personal welcome last week when he visited the company’s factory. he there, the province announced.

Foxconn operates the world’s largest iPhone manufacturing facility in Henan’s capital, Zhengzhou.

Party secretaries of both Zhengzhou city and Henan province met with Foxconn – along with the mayor and governor, state media reported. In China, the ruling Chinese Communist Party is at the forefront of decision-making, and high-level participation in the meeting with Foxconn indicates that any issues discussed can be implemented. faster.

During the Covid outbreak and subsequent lockdown last year, the Foxconn factory in Zhengzhou became the center of attention when some of its approximately 200,000 workers decided to leave and walk home.

Apple later said the Zhengzhou factory shutdown would delay the delivery of some iPhone 14 models.

China ended its strict Covid controls in December. By February, Foxconn’s Zhengzhou factory was producing at full capacity, with workers working two shifts to meet high customer demand, factory manager Wang Xue told local media.

Foxconn confirmed that the president visited Henan and planned to cooperate with the local government on projects. But the company did not share details about those investment plans, or whether it plans to move production out of China.

China says other companies are coming

China is eager to share the interest of other multinationals in local business opportunities, especially now that international borders have reopened.

Senior officers from Apple, Pfizer and Mercedes-Benz among those who want to visit China to discuss business, said a spokesman for the Ministry of Commerce at a press conference last week.

The speaker noted that dozens of multinational companies are talking to the ministry about such high-level trips.

Mercedes-Benz confirmed to CNBC that its CEO Ola Kallenius plans to visit China. Pfizer had no comment. Apple did not respond to a request for comment.

Overseas marketing tour

China is also visiting potential investors in their home countries.

After a government summit in December called for more efforts to attract foreign capital, many government-run organizations have traveled abroad to make sales pitches to China.

Wang Jinxia, ​​deputy director of Qianhai – an economic development zone in Shenzhen – led a delegation to Dubai, Singapore and London in February to drum up investment interest.

He said the trips were achieving “amazing results” – but did not elaborate. He also noted “serious challenges” in attracting foreign investment. These include unfair competition with local players in China due to business policies, lack of legal protection for foreign business in China and geopolitical risks, Wang said.

The Biden administration has increased restrictions on US business with China, such as curbs announced last year on US businesses and individuals working with Chinese partners on the most advanced semiconductors.

It is not clear to what extent other restrictions will be announced.

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To be clear, international investment continues to flow into China at a steady rate.

Foreign direct investment rose 14.5% in January from a year ago to 127.69 billion yuan ($18.39 billion), according to China’s Ministry of Commerce. That’s faster than the 6.3% increase for all of 2022.

South Korea, Germany and the UK were the biggest sources of such foreign investment in 2022, the ministry said, not to mention the US

For a Chinese region like Henan, keeping or growing investment from foreign businesses is a way of life. Official data showed that in 2019, Foxconn’s iPhone factory accounted for 84% of the province’s total exports.

Chinese Commerce Minister Wang Wentao on Thursday made a relatively rare public acknowledgment of foreign businesses’ longstanding complaints about government procurement policies that favor local Chinese businesses.

Addressing these issues are “priorities for our work,” he said in Mandarin, translated by CNBC. “We will study and introduce policies and measures together with relevant departments to ensure equal participation of foreign businesses.”

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