Supply chain relocation under control
Jul-23-2019 By : fcccadmin
China’s National Development and Reform Commission (NDRC) dismissed concerns over the supply chain relocation away from China, saying the scale of the manufacturing sector relocation is limited and its impact under control. The statement came days after the Ministry of Commerce (MOFCOM) announced on July 11 that there were no large-scale withdrawals of foreign investment from China.
In the past two years, there has been a rising chorus in the Western media on how outbound industrial relocation added woes to the Chinese economy. Some individual cases of foreign companies shutting down plants in China seemed to have supported that supposition. “In the past two years, some companies that moved their production facilities abroad have moved back, because they find the place they moved to does not fit their business,” said NDRC Spokesperson Meng Wei. “From what we know, many shoemakers from manufacturing hub Dongguan in Guangdong province that had moved out of China have closed down their plants in Southeast Asian countries and moved back,” she said. “Companies are moving out of China for a number of reasons ranging from cost sensitiveness to the need to be near their target market, but only a very few companies did this to evade U.S. tariffs on China,” Meng added. According to the American Chamber of Commerce in China, fewer than 6% of American companies are considering moving their factories from China to the U.S. because of the trade war.
Shanghai has seen steady growth in attracting foreign capital in the first half of the year, with a significant rise in the number of new foreign-capital projects. From January to June, 3,247 new foreign-investment projects were launched, up by 49.2% from a year earlier. The contract value of foreign investment totaled USD22.863 billion, up 6.3% year-on-year, while the actual foreign investment value added up to USD9.754 billion, an increase of 13.9% from the same period last year, according to the Shanghai Commission of Commerce.
The city has seen a batch of landmark projects, including the establishment of Tesla’s Gigafactory 3, Allianz (China) Insurance Holding Co as the first foreign-owned insurance company in China, and JP Morgan Securities (China) Co as China’s first foreign-controlled securities firm. By the end of June, a total of 2,998 enterprises had been set up, supported by 54 measures on expanding the opening of the Shanghai Pilot Free Trade Zone. In the first half of the year, foreign investment in the Pudong new area totaled USD4.221 billion, accounting for more than 40% of the city’s overall figure.
China’s non-financial outbound direct investment (ODI) also maintained healthy growth in the first half of this year. Non-financial ODI in 151 countries and regions amounted to CNY346.8 billion in the period, up 0.1% year-on-year, according to the Ministry of Commerce. In June alone, ODI rose 6.3% year-on-year to CNY63.7 billion.
More than 35 years needed to upgrade to hi-tech manufacturing industry
By : fcccadmin
China will need more than 35 years at the current rate of progress to become an advanced manufacturing power, despite the government’s industrial policy support for new domestic industries, according to a study by Renmin University of China in Beijing. Excess use of industrial subsidies, particularly by local governments, as well as poor implementation of anti-pollution standards, and the inability of the government to help small, private firms deal with short term operational difficulties is stunting the innovation process necessary to upgrade the nation’s manufacturing base, the study found. Over the last decade, the Chinese government has launched several industrial plans, including the controversial “Made in China 2025” project, aimed at development of hi-tech industries that would hope to make China the world leader in a series of cutting-edge manufacturing fields as it looks to move up the value chain away from its traditional reliance on mass production of low-end goods.
The United States has complained that the large subsidies China has used to develop these industries are examples of the country’s unfair trade practices which have hurt American companies. China has since downplayed its Made in China 2025 plan, but many of its industrial policies remain in place. However, despite spending billions to support these ambitions, the Chinese government’s investment has yet to add significant value to the economy, according to Zhang Jie, Professor with the Institute of China’s Economic Reform & Development at Renmin University of China. The latest available figures from the National Bureau of Statistics (NBS) showed that the value-added output of new industries, new types of business and new business models accounted for 15.7% of China’s GDP in 2017, up only 0.4 percentage points from 2016. “There is still some distance from the goal of 30% of GDP,” said Zhang, who estimated that only when value added output reaches 30% will it become the “new” engine of China’s economic growth. “At this growth rate, it will take 35.75 years.” Zhang said that the growth rate for the contribution of new industries to GDP should be between 2% and 4% per year, or five to 10 times the growth rate in 2017 to rach the target.
Mao Zhenhua, Dean at Renmin University of China’s Institute of Economics, said despite huge investment and effort from the government, China’s industrial policy has not had much of an impact on boosting new industries. “The huge investment has not brought about the emergence of a clear leading industry for the future, we have not seen signs that traditional manufacturing is being replaced either, at least on a long-term basis,” he said. “The primary and the secondary industries are both in downturns,” the South China Morning Post reports.
Foreign finance firms to speed up their expansion in China as the sector opens further
By : fcccadmin
International financial firms have vowed to speed up their expansion in China after the country announced it would bring forward measures to open up the sector effective July 20. Beijing will scrap shareholding limits on foreign ownership of securities, insurance and fund management firms in 2020, one year earlier than initially planned, according to the People’s Bank of China (PBOC). By opening up its financial industry to more foreign participation, Beijing hopes to attract capital investment to further boost the economy.
It also announced it would scrap the requirement that international insurance companies need to have 30 years of operational history before they can apply to set up China subsidiaries, and it will abolish the 25% equity cap on foreign ownership of insurance-asset management firms. The central bank’s statement said it would welcome overseas investors who wish to set up or own a stake in Chinese securities firms, currency brokerages and pension companies. The PBOC also said it would allow foreign and pension management companies.
“This is warmly welcomed by global managers,” said Sally Wong, Chief Executive of the Hong Kong Investment Funds Association. “China is a market no global managers can ignore, both inbound and outbound. “The increasing affluence of the population, the need for diversification and financial planning, and the reform in the pensions system all mean that there are huge opportunities for foreign managers.” Companies which plan to expand in China include BEA Union Investment. Pictet Wealth Management said the latest policies “will definitely entice a number of institutions to invest more in this huge market as they will be able to control their local entity.” But the Hong Kong Securities Association Chairman said he was waiting for implementation details, the South China Morning Post reports.
China is fast developing EV charging infrastructure
By : fcccadmin
Development of charging infrastructure for new energy vehicles is fast catching up with the growth in sales of such vehicles, although the number of NEVs in China still outstrips existing charging facilities, according to industry experts. They said the main driving force for the fast development of charging infrastructure includes the increased demand, due to rapid growth of NEVs, as well as the government’s efforts. “The lack of charging facilities is usually a major barrier for NEV purchases,” said Tong Zongqi, Director of the Information Department under the China Electric Vehicle Charging Infrastructure Promotion Alliance. Although China already has a large number of charging piles, there are not enough of them, and to some extent the lack of charging facilities has become a bottleneck for the quick development of the NEV industry, Tong said.
According to the latest statistics from Tong’s organization, by the end of June, charging piles for NEVs in China totaled more than 1 million units, with a year-on-year growth of 69.3%. Charging piles in public places stood at 412,000 units by the end of June, while the number in other locations stood at 591,000. A total of 10,926 charging piles were built in June in public places. Earlier, 11,656 were built on average each month from July 2018 to last month, which resulted in an overall growth of 51.5% year-on-year. However, despite the fast growth, currently every 3.5 NEVs in China share a charging pile on average, far from the ideal situation. Tong said the Chinese authorities have funded his organization to build a national charging facility surveillance platform that plans to connect charging facilities, NEV enterprises, charging service providers, and local charging facility surveillance platforms.
The Chinese authorities are expected to increase financial support for NEV infrastructure as they slash subsidies for the sector, experts said. Lin Boqiang, Dean of the China Institute for Studies in Energy Policy at Xiamen University, said NEV production in China is on a fast track and in less need of financial support compared with charging infrastructure, although the former still needs further tech breakthroughs to reduce production costs. Subsidies on different NEVs vary from 47% to 60%, depending on the distance they can cover, and on average the 2019 subsidies fell by 50% from those of 2018, the China Daily reports.
China to expand preferential immigration policies
By : fcccadmin
China will expand preferential immigration and entry policies to attract more foreign talent to more free trade zones across the country starting August 1. The decision was announced at a press conference by the Ministry of Public Security in Beijing. It will be implemented to create a better business environment. The policies include 12 clauses which provide convenience to acquire permanent residence permits by foreign talent including those who benefit China’s development, their spouses and children. The regulation also expanded the scope of long-term visa and residence permits, for example, foreign researchers, businesspeople and assistants can apply for two-to-five-year visas or residence permits. Support services will be provided to foreign graduate students who start up a business in China or excellent foreign students invited by domestic companies and institutes.
The policy demonstrates China’s determination at openness and the country’s efforts to build its image not only as a tourist destination but also as a hub of creativity and high technology, said Song Guoyou, Director of Fudan University’s Center for Economic Diplomacy. Wang Huiyao, Founder and President of Beijing-based independent think tank the Center for China and Globalization told the Global Times that “as a major talent exporting country, China is also making efforts to become a talent importing country as well, to meet the demand of national development and the nation’s effort to become a technology power.” Foreign talent will assist globalizing Chinese companies and the development of high-tech companies, according to Wang.
The preferential immigration policies were already applied since 2015 in 16 provinces and cities including Beijing, Shanghai and Guangdong province, Chen Bin, Director of the Foreigners Administration Department of the State Immigration Administration, said at a press conference. Local immigration authorities across China have issued 133,000 visas and residence permits to foreign entrepreneurs, investors and professional technical personnel and other talents.
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