China's consumption capacity and business environment attracting more foreign firms

By Rachana Gupta
0 Comment(s)Print E-mail, November 8, 2019
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A view of the equipment exhibition area during the second China International Import Expo (CIIE) in the National Exhibition and Convention Center in Shanghai on Nov. 6, 2019. [Photo/Xinhua]

The second China International Import Expo (CIIE) kicked off on Nov. 5, 2019 in Shanghai to provide greater market access to foreign firms, showcasing the government's commitment to continued economic reform. The six-day-long expo will continue until Nov. 10 and is hosting more than 3,000 companies from 150 countries and regions, a figure that's significantly higher than that of the event last year. Several new sections, such as virtual and augmented reality, autonomous driving, internet of things, and blockchain technology, have also been included in this year's expo. As a result of this expansion, the total area covered by the exhibition has reached almost 300,000 square meters, which is about a 10% increase compared with the event last year.

China proposed five initiatives at the first CIIE to further open up its market. One year on, these initiatives and measures have largely been put in place. In order to promote a higher-level of opening up in the years to come, China will continue to open up its market, improve its opening-up structure, optimize its business environment, deepen multilateral and bilateral cooperation, and advance the Belt and Road cooperation.

Notably, in recent years, China has ramped up its efforts to transform the country's economic model from export-led to domestic consumption-driven. This policy has started to pay off as the local consumption level in China has become a significant driver of its economic growth. According to the National Bureau of Statistics (NBS), domestic consumption of the country accounted for 76.2% of its economic growth in 2018. A further report from the NBS in July stated that China's retail sales of consumer goods in the first half of 2019 has swelled by 8.4% year-on-year, reaching 19.5 trillion yuan. In addition, Forrester's report released last year also stated that China's online retail market would reach close to $1.8 trillion by 2022. 

A large number of foreign investors had participated in last year's CIIE to vie for a slice of China's massive domestic market. During the event, almost $57.8 billion worth of corporate deals were signed, and as a result, many international companies have benefited immensely. For instance, New Zealand-based milk products company Theland managed to expand its sales figures to 30,000-80,000 bottles/week from a trickle of 3,000 bottles/week after participating in the first CIIE.

Night view of the Bund in Shanghai, China, Nov. 5, 2019. [Photo/Xinhua]

In addition, China's favorable policies such as cutting down its negative list, strengthening intellectual property laws, removing foreign equity caps on the manufacturing of special-purpose and new-energy vehicles, and reducing import duties have also played a significant role in attracting foreign direct investment into the country. A statement published by the Ministry of Commerce early last month underscored that FDI into the Chinese mainland has increased by 6.5% year on year to 683.21 billion yuan between January to September this year. It also stated that almost 30,871 overseas companies entered China during this period. The investment into high-tech sectors and the country's pilot free trade zones reached 203.8 billion yuan and 98.84 billion yuan, which accounted for 39.8% and 14.5% of the country's total FDI respectively. In addition, China has improved its position from 46th to 31st in the World Bank "Doing Business 2020" ranking based on the increased ease at which enterprises can conduct business in the country. The report also stated that the country scored the highest in three indicators, namely: dealing with construction permits, getting electricity, and protecting minority investors. 

Consequently, many big companies, such as Tesla and Costco, entered China this year. Tesla built its first wholly foreign-owned $2 billion electric vehicle factory in Shanghai, which is expected to produce up to 500,000 vehicles per year for both China and the international market. Also, Costco, a large American retailer, opened its first China store in August this year to cash in on the burgeoning consumer market in the country. 

By looking at the overall trends of growing demand for higher quality products by Chinese consumers as well as the government's efforts to create a level playing field for businesses, it seems that this year's CIIE will fulfil its objective of providing greater market access to overseas firms. In addition to benefiting foreign companies, the CIIE will also make domestic companies more competitive and enhance the choices available to Chinese consumers. After all, giving market access to other countries will create a more balanced trading partnership and help in building a global community with a shared future. This is a far better path forward than engaging in a zero-sum game struggle with other nations for economic supremacy.

Rachana Gupta is an active blogger, poet and freenlance content writer. She is also the author of the book "To The Horizon We Indeed Sail".

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