Exclusive

Trade has many faces: One is China’s Vote of Confidence on western companies

By Nirendra Dev 

In the season of trade disputes and economic slowdown, one factor that continues to give an immense sense of optimism to Chinese authorities is their vote of confidence on western companies. According to industry watchers in the country’s capital and in booming business hubs like Shenzhen; the ongoing crisis has not dampened the spirit of the foreign companies operating in China. Some of it is due to immense growing market but the confidence in the ‘bright future’ of Chinese economy is also guided by China’s decision to establish six new pilot free trade zones.

“It is a good move and also a courageous one. The new free trade zones are coming up in Yunnan, Hebei, Shandong, Guangxi Zhuang, Jiangsu and Heilongjiang. It shows the Chinese government wants to support an opening world economy. This will promote cross border trades, investment cooperation and promote trades in commodities,” says business woman Chen-Lanying in Nanning. The optimism is shared by business community and entrepreneurs in Shenzhen too.

One businessman on the condition of anonymity said: “China has come out of its closed economy in a big way. Now, we are part of inter-dependent world. Even hardcore Communists realise this. Thus by deepening reforms in free trade zones and streamlining regulations on foreign investment, the Chinese government has given strong and positive signals to foreign companies.” Many others seem to agree. Some also say contrary to the aggressiveness shown by the US on trade ties with China, it is the American retail sector that is going to feel the pinch of the new tariff regimes.

Some US retail players have over 12000 stores including in interiors of America and these companies could face immense hurdles in pushing their business without Chinese suppliers. In Shenzhen, some business people are already talking about this issue. Moreover, among both the Chinese business community and the government, another driving point is the fact that the US consumers in particular and customers in the western countries in general are very particular about product quality and China has the ‘reputation of sending good products overseas.

It is being analysed in details among industry players in Beijing and Shenzhen that US President Donald Trump’s ‘threat to levy a 10-per cent additional tariff on shoes, clothing and other items is likely to hit US business only. “In fact, Chinese foreign ministry spokesman Geng Shuang told journalists last week that ‘threats and intimidation’ do not work with China.  He said if the US companies withdraw from China; “others will fill in the vacancy”. On the contrary, big US players would be hardly in a position to withdraw investment or shut their one or two units in China in view of the latest developments.

According to sources in the Chinese government, big players Walmart, Procter and Gamble, Saudi Aramco, BMW, GE and Cargil are also renewing their commitment to China by expanding operations. According to reports, Cargil, the agribusiness giant, has invested $200 million in the first half of 2019 to build new plants and research facilities. The Chinese government has already announced that the inflow of foreign direct investment into the Chinese mainland rose 7.3 per cent year on year to 533.14 billion Yuan between January and July 2019.

Sources also say that part of the reason for foreign companies to remain confident in China’s economy is also attributed to trade developments being linked to Belt and Road Initiative. By June this year, it has been pointed out by a section of Chinese officials that Hubei Pilot Free Trade Zone has signed 24 big-ticket projects. According to a report in China’s leading state-owned newspaper ‘China Daily’; to seize more share in China’s new energy vehicle market, Tesla Inc from California would be also investing $7.3 billion for a manufacturing hub in Shanghai.