What will the investment "fight" this year?

China Newsweek reporter: Chen Weishan

Published on April 2023, 4, the 24th issue of China Newsweek magazine

After 5 years, the landing of Tesla factory in Shanghai has once again become a landmark event for China to attract foreign investment.

On April 4, Tesla's ultra-large commercial energy storage battery factory project was signed in Shanghai, and the factory is located in the Lingang New Area. The official public account of Lingang said that the signing of the Tesla energy storage battery factory project highlights Shanghai's increased efforts to attract and utilize foreign investment, and also shows Shanghai's attitude of creating a market-oriented, rule-of-law and international business environment, which is conducive to boosting the confidence of foreign-funded enterprises to invest in China.

A person in charge of a foreign-invested service institution told China Newsweek that the establishment of a multinational company of the magnitude of Tesla in Shanghai is of benchmark significance for boosting the confidence of foreign-funded enterprises to invest in China. Just a few days before the signing of the Tesla energy storage battery factory project, the "Several Measures to Increase the Attraction and Use of Foreign Investment in Shanghai" was released, proposing a total of 20 specific measures in four aspects.

The landing of landmark foreign-funded projects and the introduction of measures to increase the attraction and utilization of foreign investment in traditional foreign investment highlands such as Shanghai indicate that local governments are launching a new round of competition to attract foreign investment. This year's competition started with how to help foreign enterprises strengthen their confidence in investing in China.

Overseas investment: the most important thing is not to "talk about projects"

At the beginning of this year, Niu Yuru, sales and business development manager of Taicang German Center, received an email from a German company inquiring about investing in Taicang, and after forwarding it to the local investment promotion department, Taicang's representative in Germany contacted the company on the same day to arrange an offline meeting.

This speed is a true demonstration of the desire of local governments for foreign-funded projects.

At the beginning of 2023, the actual use of foreign capital in Shanghai, Suzhou and other highlands grew faster than the national growth rate. From January to February this year, Shanghai's actual use of foreign capital was 1.2 billion US dollars, an increase of 49% year-on-year, higher than the national growth rate of 61.18%. The base of foreign capital actually used in Shanghai last year is not low, and it has reached a record high, reaching 6.1 billion US dollars.

The double-digit growth at the start of the year is the result of layers of pressure to attract foreign investment, and local governments are trying to broaden the sources of foreign investment projects.

In fact, many foreign investment highlands in China have expatriate agencies in important investment sources. "In the three years of the epidemic, due to the inconvenience of travel, some German entrepreneurs who have worked and lived in Taicang have also been recruited to participate in exhibitions and docking projects as Taicang's 'investment promotion agents' in Germany." Qian Lili, deputy director of Taicang Merchants Bureau, told China Newsweek that the investment promotion agent hired by Taicang Merchants Bureau is the former general manager of Taicang German Center, hoping that he will get more project information from the German headquarters.

"I hope that the actual amount of foreign capital used will maintain a certain increase throughout the year." Gu Xi, director of the foreign investment division of the Suzhou Municipal Bureau of Commerce, told China Newsweek that the goal of attracting foreign investment in the first quarter is to maintain double-digit growth, which is also sending a positive signal to foreign-funded enterprises.

To attract foreign investment, Suzhou put forward the goal of "double hundred double thousand", make breakthroughs in the "10 billion yuan project", and organize "100 groups of investment", which includes not only overseas investment, but also investment in key domestic areas such as Beijing, Shanghai and Shenzhen, while harvesting 100 billion investment and thousands of signings.

Similar pressures are being transmitted between all levels of government. "Although there is no quantitative target for the amount and increase of foreign capital used, the internal expectation is not lower than last year, and the pressure is high." A person in charge of a grassroots investment promotion department lamented to China Newsweek that the epidemic has been limited for three years, and this year we must first make efforts in publicity and promotion. Before the end of the first quarter, he has already participated in two important investment fairs in Shenzhen and Shanghai, and the next destination is Beijing.

For some cities that are already highlands of foreign investment, they have restarted overseas investment with higher specifications and more intensively, and it has become the norm for prefecture-level cities, counties and districts to lead overseas investment promotion.

"In previous years, the investment promotion work did not need to list a detailed work plan, but this year it was required to put the plan on paper, including the plan for the investment promotion delegation's visit and the holding of investment promotion activities." Qian Lili told reporters that the frequency of visits by investment groups this year is significantly higher than in previous years. "Publicity and promotion is the basic work, and the real project docking can not be less, and there is almost no time to stop."

In January this year, four sub-jurisdictions in Shenzhen organized overseas investment promotion, of which Nanshan District organized investment promotion in Singapore twice within one month. In mid-to-late February, Cao Lubao, secretary of the Suzhou Municipal Party Committee, led a delegation to Singapore and Hong Kong. At the beginning of this year, Hong Kong capital already accounted for half of the actual foreign capital quota used in Suzhou.

At the end of March, Gu Xi once again visited Japan with the investment group. After the Spring Festival this year, he has participated in two overseas investment promotions, involving Singapore, Hong Kong and Japan. In the fourth quarter of last year, a number of investment promotion teams in Suzhou visited Japan.

Talking about the difference between the two investment visits to Japan in half a year, Gu Xi believes that the main difference lies in the specifications of the investment promotion group. "This time, the Standing Committee of the Municipal Party Committee led the team, and at the same time mobilized a number of subordinate districts and cities that are relatively strong in attracting investment from Japan, such as the High-tech Zone and Changshu City, which are also led by local leaders. This year, from the secretary of the Suzhou Municipal Party Committee, the mayor, to the leaders in charge of economic work, there are overseas visits, covering Europe, the United States, Japan, South Korea, Singapore and other places, as well as Saudi Arabia, the United Arab Emirates and other Gulf countries. ”

In fact, when various investment promotion teams in Suzhou visited Japan in the fourth quarter of last year, they had basically signed the projects accumulated for three years, so the signing amount was not an important goal pursued by this visit.

In Gu Xi's view, the goal of the Gao delegation is more to "do people's work". "In the context of a large number of signals released in the early stage, it is of great significance for city leaders to release signals to Japanese businessmen to insist on expanding opening up." Most of the people who came forward to receive this time were at the level of Japanese company presidents and vice presidents, which is conducive to releasing signals more in place. Not only is such a high-level delegation organized in Suzhou alone, but the visit of high-level delegation from various places is also conducive to the formation of clearer judgments by Japanese enterprises. ”

He said frankly that the uncertainty of the expectations of foreign-funded enterprises lies more in wondering "whether China continues to welcome foreign investment" and "they urgently need a positive response." ”

"I hope they don't forget China"

Song Wenguang became the general manager of Lesteritz Machinery (Taicang) Co., Ltd. (hereinafter referred to as "Lestritz Taicang Company") for less than a month. His predecessor, an expatriate who left last August, was one of the executives of foreign companies who left China during the pandemic.

At its peak, more than 3000,<> Germans worked and lived in Taicang, a county-level city with a population of less than one million. Now, Taicang wants to welcome back more Germans.

"The epidemic has had a great impact on communication between headquarters and Chinese branches. In 2019, a project was originally planned to be completed in 10 months, with German engineers visiting China once a month. But the project eventually took three years to complete and has lost its market. A person in charge of a German enterprise told reporters.

Inviting more executives of foreign-funded enterprises to visit is an important goal of many overseas investment promotion delegations.

According to statistics, after the National People's Congress and the National People's Congress this year, with the help of the China Development High-level Forum and the Boao Forum for Asia and other opportunities, nearly 3 executives of well-known multinational companies have visited China. In just one week at the end of March, China's Minister of Commerce Wang Wentao met with executives from more than 10 multinational companies, including Nestle and BMW.

After this round of intensive visits by foreign executives, local governments are trying to attract more foreign executives to visit the country. Suzhou is planning a series of activities for executives of multinational companies to visit Suzhou, opening a green channel for their visits, and setting a goal of inviting 1000,<> foreign executives to visit Suzhou throughout the year.

One of the levers is the "Invest in China Year Activity" organized by the Ministry of Commerce. At the end of March, the "Year of Investment in China" series of investment promotion activities organized by the Ministry of Commerce has been launched in Guangzhou, and the next stop will be in Jiangsu, focusing on Suzhou. In June, Suzhou cooperated in holding the "Taihu Forum for Entrepreneurs", and specially removed the word "East Asia" from the previous "East Asian Entrepreneurs Taihu Forum" and invited entrepreneurs from multinational companies around the world.

"At the peak of foreign company executives' visits to China, we are also promoting more senior executives to visit in the near future, and the next important opportunity is during the Expo in November." Cao Lei, deputy director of the Shanghai Pudong New Area Commerce Commission, looks forward to the on-site visit of foreign company executives to China, "This year, Pudong attracted foreign investment or 'low before high', it takes time for foreign executives to make decisions after intensive visits to China, and it is expected to form a peak in the third and fourth quarters of this year." "Pudong hopes to actually attract $11.115 billion in foreign investment this year, up from $110.6 billion last year.

In addition to visiting the investment environment, another consideration for inviting executives of foreign companies to visit is to help the Chinese branches of multinational companies compete for greater voice within the group.

"The management of the Suzhou branch reports to the headquarters executives in Suzhou, and it is a completely different concept than when they return to the headquarters to debrief. It is hoped that it can help foreign companies in Suzhou occupy a more important position in the global layout of the future headquarters, especially when the headquarters can consider tilting to Suzhou when integrating vertical and horizontal resources. There are already 1,8 foreign-funded enterprises in Suzhou, and Gu Xi hopes to further increase the number of Suzhou through their closer ties with the headquarters of multinational companies.

And the original close ties have actually loosened during the epidemic. The aforementioned German company leader worked for an instrument product that required a fingernail-sized LCD screen, and the supplier was originally located in Dongguan. In 2022, due to the epidemic lockdown, Dongguan suppliers could not supply, resulting in the company's instrument products could not be shipped. The headquarters decided to look for another supplier in Eastern Europe, and after 3 months, the supplier in Dongguan could not get the order.

The person in charge lamented that he had experienced a complete "reincarnation". "German companies were initially accustomed to setting up subsidiaries in Singapore to sell their products to China. With the growth of the Chinese market, German companies began to build factories in China and transferred trading rights from the Singapore subsidiary to the Chinese subsidiary. Originally, German companies were accustomed to locating the center of the Asia-Pacific market in China, but now they have begun to relocate the center of the Southeast Asian market in Singapore. He told reporters that China's position as the core of the Southeast Asian market has almost formed, but now it is facing challenges.

This trend is exactly what worries investment departments everywhere. A person in charge of a grassroots investment promotion department bluntly said, "Although some merchants politely expressed their longing for three years, they are also forming an expectation in their subconscious, 'You can live well without China.'" We want to forge closer ties with foreign companies, in other words, we want them not to forget China. ”

Race for stock

The goal of attracting foreign investment in various places is often "both wanting, wanting, and wanting", which requires both project quantity, project volume, and project quality.

"Foreign investment projects with large individual investment are important targets. Although Taicang has attracted a number of hidden champions among German companies, no leading German companies have yet landed. For example, while introducing new energy vehicle parts companies, it also hopes to make breakthroughs in new energy vehicle projects. Qian Lili told reporters.

New energy vehicles are one of the key industries in Taicang. "In the process of attracting investment, we will focus on the direction of industrial development and connect more deeply with enterprises in new energy vehicle parts, equipment manufacturing, aerospace and other industries." Qian Lili said that the weak link of the industrial chain is the focus of investment promotion.

She gave an example to reporters that a complete industrial chain requires not only industrial projects, but also a series of supporting productive service projects, such as Rheinland Testing that has landed in recent years. In 2022, Taicang will introduce about 50 German-funded projects, including some productive service projects.

　　依据产业规划引进全新的外资项目固然重要，但从某种意义上来说，地方政府引进外资已经进入存量竞争时代。

　　在各地政府加码引进外资的背景下，有外资企业负责人告诉《中国新闻周刊》，镇政府已经向他表达希望公司增资。“政府希望公司增资可能出于招商引资业绩考虑。”他直言，目前吸引从未在中国投资的外企来华投资比较困难，但是外企基本都在进行再投资，也就是在中国赚取的利润继续在中国投资。

　　以浦东新区为例，每年实际利用外资中50%~60%来自增资。曹磊告诉《中国新闻周刊》，外资企业的持续扩张充分说明其对浦东营商环境、市场的认可。

　　去年疫情形势稍缓后，莱斯特瑞兹太仓公司马上加速增加投资和扩展产能。疫情前公司仅有50余人，去年开始将人员增至七八十人。

There are two main factors driving the reinvestment of Lesteritz Taicang: first, under the local for local (China for China) strategy, it is necessary to enhance the company's production and design capacity in China and carry out more in-depth local procurement; Second, emerging industries such as new energy vehicles and new materials are in the ascendant in China, and companies need to keep pace with the development of these industries in China and seize market opportunities. For example, some processing technologies for old materials can also be transferred to the field of new materials.

Whether based on the company's "China for China" strategy or the pursuit of emerging markets, local governments are closely looking at the reinvestment of existing foreign-funded enterprises.

The profits of existing foreign-funded enterprises in Suzhou are often considerable. In November 2022, Suzhou issued the Policies and Measures to Encourage Profit Reinvestment of Foreign-Invested Enterprises in Suzhou (Trial), formulating a three-year action plan to provide support in terms of financial support, honorary incentives, talent plans, tax-related services and diversified guarantees, including up to 11 million yuan in financial awards for a single project in line with the industrial development direction of Suzhou. Strive to achieve more than 1000% of the actual use of foreign capital through profit reinvestment of foreign enterprises in the city in three years.

"There may not be much inflow from overseas in FDI because the current high overseas interest rates are not conducive to capital flowing into China from abroad. More about using domestic profits, or bank loans to reinvest. Gu Xi even believes that the existing foreign-funded enterprises already in China are the key targets for attracting foreign investment at present.

In his view, in the decades of reform and opening up, foreign-funded enterprises that should come to China have arrived, and the focus is on how to serve existing foreign-funded enterprises well and help them gain more say in the face of headquarters. If their energy levels can be improved and functions can be superimposed, it will bring unexpected effects.

In the face of existing foreign-funded enterprises, all localities hope that they can upgrade their energy levels, and the most direct manifestation is the competition for the headquarters of multinational companies. At present, there are 424 headquarters of various foreign-funded enterprises in Pudong New Area, accounting for almost half of Shanghai, with an average household tax of about 1 million yuan, while there are only 5 enterprises in Pudong New Area that paid taxes of more than 2021 million yuan in 542. This shows the attractiveness of headquarters of foreign-owned companies.

"The focus of attracting foreign investment is first and foremost on the headquarters of multinational companies. Multinational companies may initially have only one factory in China, but with the convergence of trade, finance, personnel, legal and other functions, we will mobilize foreign companies to upgrade their Chinese branches to China headquarters, and even Asia-Pacific and world headquarters. Cao Lei introduced that the German chemical company Covestro moved the headquarters of the polycarbonate division from New York to Pudong in 2020, because the Chinese market accounts for <>% of the global market of the division and has enough right to speak, and this is the first time that China has ushered in the headquarters of a multinational company.

As a highland of foreign investment, Suzhou has also comprehensively benchmarked the relevant policies of Shanghai and issued incentive policies especially for the headquarters of multinational companies. In August 2021, Suzhou issued Several Policies and Measures to Encourage Multinational Companies to Set Up Regional Headquarters and Functional Institutions in Suzhou (Trial), which clearly provides eight full-cycle incentives from start-up, operation, reinvestment, energy level improvement, functional superposition, employment, land use to honor. Last year, the Implementation Measures for Supporting the Development of Headquarters Enterprises in Suzhou was publicly released in March 8, providing support for large-scale headquarters, innovative headquarters, newly registered or newly introduced headquarters, etc., with a maximum of 8 million yuan in new introduction incentives.

However, in Gu Xi's view, these incentive policies for headquarters are just icing on the cake, not completely relying on such incentive policies to attract the headquarters of foreign-funded enterprises, but more Chinese branches rely on when reporting to the headquarters.

In the face of the "poaching corners" of neighboring provinces and cities, the "Several Measures for Shanghai to Increase the Attraction and Utilization of Foreign Investment" issued in April this year also clearly stated that qualified headquarters enterprises can enjoy subsidies and incentives in accordance with laws and regulations.

In contrast, many Yangtze River Delta cities around Shanghai do have a certain advantage in cost, and the land price of other cities in close proximity to Shanghai is only half that of Shanghai.

"Of course, we hope that foreign-funded enterprises can settle their headquarters in Suzhou, or settle more functional institutions other than production, such as research and development, distribution, sales, etc., in Suzhou." In terms of striving for the headquarters of foreign-funded enterprises, Suzhou does have a gap in energy level compared with Beijing and Shanghai, but we hope to give full play to the cost advantage and stock advantage to guide the enterprises that have already laid out production bases in Suzhou to superimpose more functions and transfer to the direction of headquarters. Gu Xi said.

How to "spell policy"?

Not long ago, Qian Lili just received a German company specializing in lubricants, and there were 26 Chinese cities on the "long list" of the other party's location, and after all visits, they would screen out a "short list" of 8 cities, and submit them to the German headquarters for discussion and screen out the cities that need to be sent by the headquarters to visit the site.

"During the field inspection, merchants will first care about the location of the factory and plot, including how far away from the highway entrance and exit, and whether the surrounding supporting facilities are mature. The second is the cost of employment, such as the approximate salary level of a skilled worker. Qian Lili told reporters that although German companies are accustomed to on-site investigations, in recent years, they will also present the situation of factories and plots to customers through panoramic photography, which is also convenient for the clients of German enterprises to report to the headquarters. More meticulous services like this are being promoted everywhere. ”

In fact, the competition for foreign-funded enterprises has begun before the epidemic, and what impressed Qian Lili was the competition for German companies in surrounding cities. "The Administrative Committee of Taicang High-tech Zone once received a German-funded project, the investment volume is not particularly large, and the production process is suspected of involving chemical processes. After visiting the factory, he returned to the office building of the management committee, and there were already investment personnel from other cities waiting in front of the door to pick up the merchants directly. ”

In order to compete for foreign-funded projects, various places sometimes give policies and services, which make investment competitors feel incredible. Some grassroots investment promotion personnel told reporters, "For example, in previous years, preferential tax policies could give 'five exemptions and five halves', and even return the land payment of enterprises in the form of rewards and subsidies to achieve 'zero land price'." ”

However, the supranational treatment of foreign investment has become a thing of the past, and since the implementation of the Foreign Investment Law, more emphasis has been placed on the enjoyment of national treatment by foreign-funded enterprises. Gu Xi told reporters that at present, in the process of attracting investment, there is no longer a distinction between domestic and foreign investment, but more attention to the texture of the project.

"Nowadays, preferential policies such as taxation and land are more of a symbolic statement, and German companies basically do not fancy it." Song Wenguang thought.

Compared with preferential policies, the competition of local governments is more about the professionalism of serving foreign-funded enterprises. "It is necessary to capture the topics that foreign enterprises are concerned about, such as industrial support and business environment, while providing stable expectations." For example, some foreign-funded enterprises want to enter China in the form of light assets, and we can also provide industrial park carriers. Gu Xi said, "Because Suzhou is a traditional highland of foreign investment, the staff who attract investment have more experience in dealing with foreign capital." ”

In addition to the traditional project-oriented services such as "taking land and starting construction" and shortening the time for enterprises to apply for business licenses, the service targets are also extended to people. The "Several Measures for Shanghai to Increase the Attraction and Utilization of Foreign Investment" proposes to "provide entry-exit and stop-and-stay convenience for executives of foreign-funded enterprises, foreign technical personnel themselves and their families", and "realize the function of online handling in Chinese and English for high-frequency matters such as entry-exit and work permits for foreigners at the foreign-related service window".

"Pudong has a shared service platform dedicated to providing services for foreign-funded enterprises, providing ten major services, including visas, permanent residence qualifications and other services for foreign enterprises." Cao Lei said.

For foreign companies, another important service may be the role that local governments can play when exploring the Chinese market.

Gu Xi told reporters, "An important service is to help foreign-funded enterprises explore application scenarios in the Chinese market, because domestic emerging industries are developing rapidly." Some foreign-funded enterprises, especially those from Europe and Japan, tend to have long decision-making cycles and may need better communication from the government to combine their advantages with changes in the Chinese market. ”

Cao Lei introduced to reporters that this year, Pudong took the lead in Shanghai to carry out the headquarters resource docking plan to connect products, industrial chains, innovation and social responsibility. At the top of the list is the docking at the product level. "For example, Dole Food Company has a company engaged in fruit import trade in Pudong, and through the government's promotion, Dole fruit has entered Disneyland and Tesla Super Factory sales. For example, a beverage from Louis Dreyfus previously hoped to better enter the circulation field of the Chinese market, and the government arranged for it to connect with offline and online channels such as Freshippo, JD.com, and China Resources Vanguard. ”

Many foreign investors in Shanghai and Suzhou feel that the local government genuinely wants them to get better returns from the Chinese market, and this will be the key to retaining them.

China Newsweek, Issue 2023, 15

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