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Further opening up of manufacturing to promote inclusive global growth

Miao Wei
Updated: Apr 20,2018 4:22 PM     China Daily

“A single tree cannot block the chilly wind,” goes a European saying. Similarly, a Chinese proverb says: “Many hands make light work.” It is becoming a global consensus to build a community of shared future for humankind based on openness and win-win cooperation.

This year 2018 is the first year after the 19th National Congress of the Communist Party of China, and also marks the 40th anniversary of China’s reform and opening-up.

Throughout the past 40 years, China’s manufacturing industry has remained committed to the philosophy of open development, the development path of “bringing in” and “going global”, and opening up both at multilateral and regional levels. Therefore, the manufacturing sector has gradually shifted from policy-oriented to institutional opening-up, becoming an important part of the overall national opening-up process for win-win cooperation.

The past four decades also have witnessed profound changes in China. As far as manufacturing is concerned, China has become the leading country in the world in terms of production, export, foreign investment utilization and overseas investment. And China’s manufacturing sector is gradually integrating into the global industry division of labor, contributing significantly to global economic growth.

In 2017, China’s total import and export of goods reached $4.1 trillion, which is 783 times of that in 1978. For the manufacturing sector, the annual actual utilization of foreign capital reached $33.5 billion and direct overseas investment amounted to $120.1 billion, with mutually beneficial cooperation with foreign countries expanding in scope, level and approach. A framework of all-round opening-up of the manufacturing sector is also taking shape and continues to develop.

Scope of opening-up continues to increase

The manufacturing sector has remained a key area for foreign investment. In 2017, there were 4,986 newly established foreign-invested manufacturing enterprises in China, up 24.3 percent year-on-year. The recently revised Catalogue for the Guidance of Foreign Investment Industries (2017) has substantially reduced the access restrictions for foreign investment. In terms of manufacturing products, 22 of the 31 categories, 167 of the 179 subcategories, and 585 of the 609 branch-categories are fully open to foreign investment, accounting for 71 percent, 93.3 percent and 96.1 percent, respectively, of the categories.

In recent years, the momentum of Chinese enterprises’ investment abroad has been growing vigorously. The manufacturing sector takes up more than one-third of the total overseas investment, covering areas such as textiles, food, machinery, automobile and electronics, and generating enormous economic returns for both sides.

For example, Geely acquired Volvo in 2010. After a series of strategic adjustments, Volvo sold more than 500,000 vehicles worldwide in 2015, a record high in its 88-year history, helping the company overcome its difficulties and regain business vitality. During the process, Geely also improved its management and established with Volvo a community of shared interests through collaboration and scale effect.

Areas of cooperation continue to expand

From special economic zones at the beginning to opening up coastal cities and central and western regions later, the opening-up process for China’s manufacturing sector is becoming multi-dimensional, multi-level and wide-ranging. Since China established its first special economic zone in Shenzhen in 1980, capital, technologies and talents from different parts of the world have been attracted by the city, and later by the entire Chinese market of 9.6 million square kilometers.

As of today, many of the world’s top 500 companies, such as Volkswagen, Siemens, Apple, Intel, Samsung, Toyota and Tata, have all established their presence across the eastern, central and western regions of China. Most of those companies have enjoyed good investment returns. In recent years, while continuing with the “bringing-in” strategy, the Chinese government has also encouraged domestic enterprises to “go global”.

Driven by the Belt and Road Initiative, Chinese manufacturing companies are expanding their overseas investment to other regions besides Europe, North America and Southeast Asia, which have been their focus for decades. Many companies are exploring investment opportunities in countries along the Belt and Road and seeking cooperation on international capacity and equipment manufacturing.

China has signed relevant documents with more than 30 countries, including Kazakhstan and Malaysia, on international capacity cooperation for synergizing development plans and facilitating cooperative projects. As a result, a batch of major projects on iron and steel, non-ferrous metals, construction materials and other areas are being smoothly implemented to meet the urgent needs of the countries along the Belt and Road, and a number of industrial parks have been established overseas. These cooperation projects have boosted the industrialization and modernization process of the concerned countries.

Process of upgrading opening-up continues

In recent years, the focus of foreign investment has been gradually moving from processing and manufacturing to high-tech fields such as computers, integrated circuits and smart manufacturing.

Nearly 2,000 multinational companies have set up their regional headquarters or research and development centers in China. For instance, Dassault Systems and its Chinese partner have agreed to establish a Sino-French joint industry innovation center. They will strengthen cooperation in dynamic simulation, additive manufacturing and multi-robot advanced manufacturing to develop an incubation platform for future innovative manufacturing technologies.

The actual use of foreign investment in high-tech manufacturing was $66.59 billion in 2017, up 11.3 percent year-on-year, of which the growth rates for such sectors as electronics and communications equipment, computers and office equipment, and medical equipment and instruments were 7.9 percent, 71.1 percent and 28 percent, respectively. The scale and level of overseas investment by Chinese enterprises are also seeing rapid increase.

In 2012, Chinese direct investment in the United States exceeded, for the first time, US investments in China. In 2016, China’s direct investment in the US reached $16.98 billion, up 111.5 percent year-on-year. And Xuzhou Construction Machinery Group, Zoomlion, Sany and Liu-Gong Group, which are among the world’s top 20 engineering machinery manufacturers, as well as other Chinese companies have set up R&D centers in Europe.

Cooperative systems being normalized

Thanks to the implementation of the Made in China 2025 plan, China has enhanced synergies in manufacturing development strategies and promoted cooperation with Germany, France and other countries through multilateral or bilateral mechanisms. The exchanges and cooperation, among others areas, cover strategy coordination, standardization and development of industrial parks.

In fact, a number of financial cooperation mechanisms have been in place to promote bilateral cooperation in manufacturing, including China-ASEAN Investment Cooperation Fund, China-Latin America Production Capacity Cooperation Investment Fund, China-EU Joint Investment Fund, China-Mexico Investment Fund, and China-France Fund for Joint Cooperation with Third-Party Markets.

Besides, Sino-US and Sino-German cooperation on smart manufacturing and Industrial Internet is deepening. For example, General Electric Company is cooperating with Chinese companies on Industrial Internet technologies and standardization. Another example is that, by focusing on smart manufacturing, standardization, talents development, demonstration parks, China and Germany have launched pilot projects for cooperation on intelligent manufacturing and production process networking so as to learn from each other and achieve mutual benefit through new ways of cooperation.

The level of reciprocity continues to improve

While benefiting from the inflow of foreign capital, technologies and talents, China’s manufacturing sector has also continuously generated favorable economic returns for foreign companies. In 2017, a total of 24.72 million passenger vehicles were sold in China, of which German, Japanese, US, South Korean and French brands accounted for 19.6 percent, 17.0 percent, 12.3 percent, 4.6 percent and 1.8 percent of the total sales volume, respectively.

By investing overseas, Chinese manufacturing companies have also brought funds, technologies and products to the target countries and thus contributed to the development of the local economy, by creating jobs and paying tax, producing a win-win result.

By the end of 2017, Chinese companies’ accumulated investment in overseas trade cooperative zones was $30.7 billion, which generated $2.42 billion in tax and fees, and created 258,000 local jobs for the host countries. A report released by the National Committee on US-China Relations shows Chinese companies employed more than 140,000 American workers in Ohio, which not only generated tax income and created jobs, but also helped improve local public infrastructure. This prompted even The Wall Street Journal to refer to Chinese investment as helpful for reviving the Rust Belt cities in the US.

The 40 years of reform and opening-up have vigorously promoted the rapid development of China’s manufacturing sector, supported the sustainable and rapid growth of the Chinese economy, and contributed significantly to the steady growth of the global economy. According to the World Economic Situation and Prospects 2018 report published by the United Nations, global economic growth is estimated to have reached 3 percent in 2017 with the Chinese economy contributing about one-third to that growth.

Foreign firms benefit from China’s progress

According to the 2017 China Business Environment Survey, released by the US-China Business Council recently, 95 percent of the responding foreign companies said they enjoyed continuous profits in China, with one-third of the respondents indicating their business profits in China are higher than in other markets.

With the rise of the Chinese manufacturing sector, some people are concerned that the spillover effect that might arise from structural problems such as excess capacity will have a negative impact on other countries’ industries. Others are worried that the Made in China 2025 plan may only benefit the local enterprises and create obstacles to foreign companies, thus resulting in unfair competition. These concerns are unnecessary.

As General Secretary Xi Jinping stated in the report to the 19th CPC National Congress: “China will not close its open door to the world; instead, China will become more and more open.” China’s manufacturing industry has been and always will be upholding the fundamental principle of mutual benefit and open cooperation. We will also further open up the manufacturing industry, improve policy transparency and stability, optimize government services and efficiency, and continue to improve the business environment.

Moving from where we are, we will implement the commitments to further open up such sectors as automobiles, shipbuilding and aircraft manufacturing, by easing restrictions over the proportion of foreign equity as early as possible, especially in the auto sector. We will also enhance alignment with international economic and trade rules, and provide foreign investors with more and better opportunities.

Solid steps will be taken to implement the Belt and Road Initiative. We will see to it that the enterprises, associations, parks and governments play their due roles in the implementation. We will also improve public services and encourage more Chinese companies to invest and do business in countries along the Belt and Road, in order to establish high-level R&D centers, manufacturing bases and industrial parks. In response to the huge demands arising from the Belt and Road Initiative, we will facilitate exchanges and cooperation with countries along the Belt and Road in smart manufacturing, Industrial Internet, 5G, connected vehicles, small and medium-sized enterprises, civil aviation and cybersecurity, thus promoting mutual benefit and common development.

Business environment will be optimized

We are committed to ensuring that the Made in China 2025 plan and other relevant policies are applied equally to all enterprises in China, both Chinese and foreign enterprises. We will establish a solid mechanism for managing foreign investments — characterized by pre-establishment national treatment with a negative list approach — reducing government imposed transaction costs, strengthening intellectual property rights protection, and enhancing regulation both during and after investment, with the aim of creating a stable, fair, transparent, law-based business environment for global investors.

It has been widely acknowledged throughout history that openness brings progress and isolation only leads to backwardness. Given the complex and ever-changing international environment, no country on its own can address the many challenges, nor can any country afford to retreat into self-isolation. We will adhere to the principle of open cooperation and market-based orientation, integrate into the global supply chain at a deeper and broader level, and actively fulfill our due social responsibilities in the process of opening-up and cooperation.

And we will work together with other countries to share responsibilities, overcome difficulties, and make economic globalization more open, inclusive, balanced and beneficial with a view to building a community of shared future for humankind.

The author is minister of Industry and Information Technology.

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