Door opened wider for foreign-invested businesses

Positive policies, easier market access, advances in innovation attract more overseas players

When discussing the pace of innovation in China, Matthew Ye, the local head of French tire and mobility company Michelin, offers a perspective that differs from many senior executives in other parts of the world.

Collaborating with Chinese electric vehicle companies and traditional car manufacturers has become more demanding in terms of response speed and technical requirements compared with the past, said Ye, CEO and president of Michelin China and Mongolia.

"As a result, I must spend more time to push our local, European and Japanese engineers in China to accelerate their innovation efforts," Ye said, adding that the company will continue to expand passenger car tire production capacity at its factories in Shanghai and Shenyang, Liaoning province, to meet the country's surging demand.

With a similar outlook, Josh Weiss, president of the manufacturing intelligence division at Hexagon AB, said the Swedish industrial group will put its new South China headquarters in Shenzhen, Guangdong province, with investment of more than 200 million euros ($214.38 million), into operation by the end of 2025.

Along with supporting the company and its partners' manufacturing businesses in China, the facility will provide solutions for clients in Southeast Asia and other Asian countries.

With China creating more favorable conditions to transform and modernize traditional industries and cultivate emerging sectors, market watchers and executives from multinational corporations are confident about the substantial growth opportunities and greater commercial engagement in the world's second-largest economy.

Recent policy measures to remove all market access restrictions for foreign investors in the manufacturing sector are expected to prompt foreign companies to increase their investments in China, with a focus on high-end manufacturing and innovation, they said.

'Negative list' update

The latest edition of China's national negative list for foreign investment, which took effect on Nov 1, removed the last two manufacturing-related restrictions, according to the National Development and Reform Commission, the country's top economic planner.

The items on the latest negative list, which specifies fields that are off-limits to foreign investors, have been further reduced to 29.

Another negative list applied in the country's free trade zones, which involve pioneering pilots in opening-up practices, achieved zero restrictions on foreign investment in manufacturing in 2021.

Wang Xing, a partner expert at management consultancy Roland Berger, believes that these opening-up moves have significant strategic importance.

The updated national negative list, in conjunction with other policies aimed at attracting overseas capital, not only demonstrates China's determination to deepen reforms, but also creates a better investment and business environment for foreign companies. They are key measures for the integration of Chinese industries into the global economy, said Wang.

"In the current complex geopolitical environment, many multinational corporations are reconfiguring their global manufacturing bases and supply chain layouts," said Wang.

Numerous companies are actively establishing "lighthouse factories" — advanced manufacturing facilities recognized for their leadership in applying cutting-edge technologies to drive innovation, efficiency and sustainability in production — across China. These investments cater not only to the Chinese market, but also strive to bolster overall global competitiveness and digital transformation, he added.

Lighthouse factories can effectively optimize operations, and significantly reduce waste, energy consumption and production costs while boosting productivity, according to the Ministry of Industry and Information Technology.

The manufacturing industry was the earliest sector in China to open up to foreign investors and is also the most competitive and closely coordinated one in terms of the global industrial division of labor.

Scaling up high-tech manufacturing can help China enhance the value-added component of its economy and secure its position in global value chains. This will move China away from reliance on low-cost, labor-intensive industries, said Zhao Ping, dean of the academy at China Council for the Promotion of International Trade in Beijing.

"A well-established supply chain and infrastructure for high-tech industries make it easier for foreign companies to set up operations and integrate into local ecosystems," said Zhao. "By prioritizing innovation, China grants opportunities for collaboration in research and development, which appeals to multinational corporations seeking to advance their technologies."