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Cultural ProductsPwC recently released a research report titled "Executive Insights into Multinational Enterprises in China: Investment Opportunities in Central and Western China", which shows that China's central and western regions are becoming a "new hotspot" for foreign investment. According to the above report, over 70% of the surveyed companies have considered conducting business in central and western China. Population and market size, preferential policies for foreign investment by local governments in the central and western regions, and labor and land cost advantages are the three key factors that attract multinational enterprises to invest in the central and western regions.
Huang Yaohe, Managing Partner of PwC China's Global Cross border Services, Managing Partner of Merger and Acquisition Services Market, and Managing Partner of Corporate Financing and Mergers and Acquisitions, stated that over the past forty years of reform and opening up, China has become an important destination for attracting global foreign direct investment. For a long time, foreign direct investment has mainly been concentrated in coastal areas of China. But with the continuous promotion of regional coordinated development strategy, the central and western regions represented by Sichuan, Chongqing, Hubei, Hunan, and Shaanxi have shown strong attraction to foreign investment due to their advantages in population, labor force, and market size. In addition, in recent years, the central and western regions have frequently introduced various favorable policies, continuously optimized the business environment, continuously improved infrastructure, increased subsidies, and cultivated a fertile ground for multinational enterprises to invest and develop.
In January of this year, PwC China conducted research on over a hundred executives at the annual multinational enterprise executive meeting in Shanghai to understand their views on investing in the central and western regions of China. Research shows that over 70% of surveyed companies have considered investing and conducting business in the central and western regions, which also means that the central and western markets are becoming increasingly important in the Chinese strategy of multinational corporations.
In the survey, 30% of the surveyed companies believe that the central and western regions contain huge opportunities, and 15% of the surveyed companies indicate that the extraordinary market opportunities in the central and western regions are expected to build a new development pattern that breaks through the existing market scenarios. In terms of investment plans, multinational corporations also maintain a positive attitude towards overall investment in the central and western regions. 17% of surveyed companies plan to invest at least half of their investments in the central and western regions in the next one to three years, while up to 52% of surveyed companies plan to invest a small proportion in the central and western regions, and 17% still plan to invest entirely in coastal areas.
Market and policy are two important considerations for multinational corporations investing in the central and western regions. The interviewed companies believe that the populous provinces in the central and western regions have a large market, which is conducive to the development of the consumer industry. In addition, the labor costs in the central and western regions are much lower than those in coastal areas, which helps to further reduce the operating costs of multinational enterprises.
When it comes to the policy expectations of multinational corporations investing in the central and western regions, tax incentives and financial subsidies are the most attractive policy factors for surveyed enterprises to invest in the central and western regions. Simplifying foreign exchange management and improving infrastructure are also policies that the surveyed companies are more concerned about, ranking third and fourth respectively.
In terms of market positioning, 77% of surveyed companies position the central and western regions as the market for their products or services, 47% of surveyed companies position the central and western regions as their production bases, followed closely by land routes and logistics hubs connecting South and Central Asia. In addition, multinational corporations have gradually positioned themselves as research and development and technology based on choosing the central and western regions as their market and production bases.
It should be noted that there is still a gap between the central and western regions and coastal regions in terms of infrastructure, business environment, talent supply, and industrial chain maturity. Huang Yaohe stated that there is still huge development space for China to attract foreign investment, and the central and western regions are expected to provide sustained impetus for the new round of growth of multinational enterprises in China. For multinational enterprises investing in the central and western regions, in addition to paying attention to macro factors such as market potential, investment policies, and business environment, they also need to adapt to local conditions, improve the compatibility of their products and services with the local market, and establish good relationships with local governments, employees, and upstream and downstream enterprises in the supply chain.
"For local governments in the central and western regions who hope to introduce foreign investment to promote economic development, it is necessary to continuously improve the business environment, combine the direction of local industrial development and production factor endowments, tailor attractive policy combinations for multinational enterprises, and effectively reduce their production and operating costs." Huang Yaohe said.
