China is rolling out the red carpet to attract foreign executives

BEIJING – China is doing its best to keep multinationals like Apple and its supplier Foxconn in the country.

These efforts to attract foreign investment come as the pandemic and geopolitical tensions prompt 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 rated China as their third investment priority. The survey found that the number of companies considering or beginning to move their manufacturing and sourcing outside of China rose 10 percentage points from last year.

The American Chamber of Commerce report stated that the majority of respondents do not plan to move their supply chains.

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

After this drop in sentiment, China is working hard to keep foreign companies investing — and to support domestic growth. The Ministry of Commerce said Thursday that it will for the first time launch the “China Year of Investment” activities.

In a sign of how hard local governments are trying to attract foreign dollars, senior officials from central China’s Henan Province personally welcomed Foxconn Chairman Yong Liu last week during his visit to his company’s factory there, Boycott announced.

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

State media said party secretaries in both Zhengzhou city and Henan province met with Foxconn – along with the mayor and governor. In China, the ruling Chinese Communist Party takes the lead in decision-making, and this high-level participation in the meeting with Foxconn indicates that any matters discussed can be implemented more quickly.

During the Covid outbreak and subsequent lockdown last year, Foxconn’s Zhengzhou factory became a focus of attention when some of its 200,000 workers decided to leave and go home.

Apple later said that Zhengzhou factory disruptions would occur Delayed delivery of some iPhone 14 models.

China ended its strict controls on the Covid virus in December. By February, Foxconn’s Zhengzhou plant was producing at full capacity, with employees working in double shifts to meet high customer demand, plant manager Wang Xue told local media.

Foxconn confirmed that its boss has visited Henan and plans to cooperate with the local government on projects. But the company did not share details regarding those investment plans, or whether it has any intention of moving production outside of China.

China is eager to show how interested other multinationals are in local business opportunities, especially now that international borders have reopened.

A Commerce Ministry spokesperson said at a press conference last week that senior executives from Apple, Pfizer and Mercedes-Benz are among those who want to visit China to discuss business.

The spokesman pointed out that there are dozens of multinational companies talking to the ministry about such high-level visits.

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.

China also visits potential investors in their home countries.

After a major government meeting in December called for greater efforts to attract foreign capital, several government-led groups traveled abroad to make sales pitches to China.

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

He described the visits as having achieved “remarkable results” but did not elaborate. He also cited “serious challenges” in attracting foreign investment. These include unfair competition with domestic players in China due to industrial policies, lack of legal protection for foreign companies in China and geopolitical risks, Wang said.

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

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

To be clear, international investment is still flowing into China with steady steps.

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. This is faster than the 6.3% increase for the whole of 2022.

The ministry said South Korea, Germany and the United Kingdom were the largest sources of such foreign investment in 2022, without mentioning the United States.

For a Chinese region like Henan, retaining or increasing investment from foreign companies is a lifeline. Official data showed that in 2019, Foxconn’s iPhone factory accounted for 84% of the entire province’s exports.

China’s Commerce Minister Wang Wentao on Thursday made a relatively rare public acknowledgment of foreign firms’ longstanding grievances about government procurement policies that favor domestic Chinese firms.

Addressing these issues, he said, in Mandarin, which was translated by CNBC, are “our business priorities”. “We will study and introduce policies and procedures with relevant departments to ensure equal participation of foreign companies,” he added.