More than eight out of 10 foreign companies operating in China believe their profitability will remain steady or increase this year, according to a new report from the China Council for the Promotion of International Trade.
The country’s leading foreign trade and investment promotion agency surveyed almost 800 foreign companies in 26 provinces, autonomous regions and municipalities between April and June 2023. It also found that nearly 70% of foreign-funded businesses are optimistic about their outlook for the Chinese market for the next five years.
Over 90% of respondents believe that the Chinese market’s attractiveness will either increase or remain stable.
Among the surveyed foreign firms, 60% are processing and manufacturing businesses, while 65% are small, medium and micro-sized enterprises.
The primary reasons cited by these foreign companies for investing in China include ‘large market size’, ‘multiple preferential policies’ and ‘complete industrial and supply chains’, accounting for 78%, 53% and 40% respectively, the survey found.
Sun Xiao, a spokesman for the Beijing-based CCPIT, said: “As for development opportunities, foreign respondents said that the high-quality innovation environment, continuous opening-up in central and western regions and the booming digital economy will offer strong momentum for their growth in China.”
He added: “With China’s overall economic recovery and improvement, the confidence of multinational corporations in investing in the country has remained stable, and there has been no change in the overall trend of foreign companies expanding their investments in China.”
Some of the other major reasons cited for these firms’ investments are the large size of the Chinese market, favourable policies and a complete industrial chain. For the second straight quarter, respondents said that the most significant development opportunity is technological innovation, as well as research and development.
Moreover, CCPIT – which is backed by the commerce ministry – polled 3,100 Chinese exporters. Over three-quarters of them said they are confident about development opportunities in the third quarter, Sun said.
Chen Wenling, chief economist at the China Center for International Economic Exchanges in Beijing, added: “China has implemented several policy measures to drive its economy toward high-quality development. The country is strategically shifting its focus toward cultivating new strengths centred on technologies, standards, brands and services, thereby facilitating a multifaceted transition in its economic landscape.”
She said: “Since the start of 2023, executives from multinational corporations, such as Siemens AG, ASML Holding NV, Tesla Inc and Visa Inc, have been engaging in a notable trend of consecutive visits to China, displaying their strong enthusiasm to explore and expand investments in the Chinese market.”
Recently Thyssenkrupp, a German industrial engineering conglomerate, announced that one of its subsidiaries from the high-end manufacturing sector opened a new production line following investment of 500 million yuan ($69.9 million) at its plant in Xuzhou in eastern China’s Jiangsu province.
This is the fourth time the company has invested in the factory since its establishment in 2005. The new investment will boost the plant’s production capacity by 150,000 metric tons.
China extends tax reductions and lending for SMEs
The Chinese government is to extend several support measures for micro and small firms, including lending support and tax reduction, in an attempt to boost their growth.
Taxpayers with monthly sales revenue of no more than 100,000 yuan (about £11,000) will continue to be exempt from value-added tax, according to statements jointly released by the Ministry of Finance and the State Taxation Administration.
Added to that, micro and small firms and self-employed households will continue to enjoy a 1% discount on the value-added tax rate, reduced from 3%.
Other financial support will also be maintained, the government has confirmed. Lender income from loan interest and guarantee fees related to small business entities will remain free from value-added tax, and their loan contracts will continue to be exempt from stamp duty.
All these policies will be effective until the end of 2027.