World Economy

Expansion of China’s Manufacturing Sector Benefits Foreign Firms

In 2017, the manufacturing sector attracted total FDI of $33.5 billion, while outbound investment by domestic companies in the sector totaled $120.1 billion
Opening up the automobile sector to foreign firms put an end to a “protection period” for domestic brands.  The picture shows Tesla enters China’s domestic car brands.Opening up the automobile sector to foreign firms put an end to a “protection period” for domestic brands.  The picture shows Tesla enters China’s domestic car brands.

The constant widening of opening up in China's manufacturing sector will not only help domestic industrial upgrading but benefit all foreign companies, industry experts say.

"The manufacturing sector has consistently expanded the fields and raised the level of opening up," said Huang Qunhui, head of the industrial economics institute under the Chinese Academy of Social Sciences, Xinhua reported.

Among 609 sub-categories of the manufacturing sector, 96.1% were completely open to foreign investment, according to the ministry of industry and information technology.

In 2017, the manufacturing sector attracted total foreign direct investment of $33.5 billion, while outbound investment by domestic companies in the sector totaled $120.1 billion.

The ministry data also showed that 4,986 foreign-invested manufacturing firms were set up last year, up 24.3% year-on-year. The main fields of foreign investment covered computers, integrated circuits, smart manufacturing and other high-tech sectors.

The sector's open attitude towards foreign investment "not only raised the country's own strength, but also provided handsome returns for foreign companies and institutions," Huang said.

Last month, China announced plans to open the automobile sector wider to foreign investment, with a timetable to phase out the shareholding limits for foreign investors.

FDI in Auto Sector  

Shareholding limits for special-purpose vehicles and new energy vehicles will be scrapped for foreign investors in 2018, while those for commercial vehicles will be lifted in 2020, according to the National Development and Reform Commission, the country's top economic planner.

MIIT chief engineer Chen Yin said the ministry has been working with other departments on reducing automobile import tariffs "by a considerable amount", and would make the cuts public as soon as possible.

Opening up the automobile sector to foreign firms put an end to a "protection period" for domestic brands, said Dong Yang, vice director of the China Association of Automobile Manufacturers.

"Instead of having huge impact on domestic automakers, wider opening up will be conducive to encouraging competition and pushing the industry to raise quality and efficiency," Dong said.

Industrial development depends hugely on global economic integration, said MIIT chief engineer Chen Yin.

"The Chinese manufacturing sector will further expand opening up to stimulate the innovation of advanced technology, realize compliance with international economic and trade rules, and offer more and better investment opportunities to foreign firms," Chen said.

Investing Overseas

Minister of industry and information technology, Miao Wei, said that while continuing to uphold its stance on introducing foreign investment, the government also encouraged Chinese manufacturers to invest overseas.

By the end of last year, Chinese companies had invested more than $30 billion in overseas economic and trade cooperation zones, creating 258,000 local jobs.

"A pattern of all-round opening up of the manufacturing sector has come into being," Miao said. "The fundamental principle for China's manufacturing development was, is and will always be pursuing mutual benefit through open cooperation."

"China will continue to raise policy transparency and stability, optimize government services and improve the business environment for investors from all around the globe," he said.

Turning Trash Into Cash

Steel mills in China are spending big on equipment that shreds cars and other junk metal for use as raw material, as government demands to make smoke-stack industries cleaner continues to reshape heavy manufacturing.

Investing in scrap-processing equipment is the latest sign that mills have cash to spend after bumper margins last year resulting from skyrocketing metal prices. It also indicates that Beijing's tough rules on pollution are pushing companies to be more efficient.

Scrapyards typically remove paint and other contaminants from used metal, cut it into small pieces and bale it for delivery to factories. But steel plants are increasingly performing those processes themselves to feed their furnaces, according to executives from four mills and a shredder maker.

They say producers want to use cheaper untreated scrap, which is more abundant and typically sells for about 200-500 yuan ($31-78) per ton less than the cleaner product, potentially saving substantial amounts of money and giving them more control over their raw material supplies.

Hebei Jingye Group, a medium-sized plant in Shijiazhuang, is installing a 3,000-horsepower shredder next month, which would allow it to more than double its scrap intake this year to two million tons, said Zhang Lijie, manager of the scrap department. Cheaper raw materials could save the company as much as $157 million a year.


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