Asia

Foreign firms to expand in China despite challenges, HSBC says

BEIJING (BLOOMBERG) – International firms are expanding their businesses in China despite trade tensions and supply-chain challenges from the coronavirus pandemic, a HSBC Holdings Plc survey finds.

Ninety-seven per cent of surveyed companies said they intend to keep investing in China, mainly due to the country’s sizable market, expectations of continued economic growth and well-developed supply chains, according to the bank’s survey of 2,174 foreign firms.

Of those, 19 per cent plan to invest 25 per cent or more of their operating profit in China, while another 42 per cent report intended investment of between 11 per cent and 25 per cent of their profits.

“China overwhelmingly emerges as the most attractive destination for investment when compared to nine other major Asian economies,” according to the report.

“Despite the changing nature of international relations, it is clear that international companies will continue to find value in China-centric growth and investment strategies.”

Although there’s a perception that manufacturing firms are leaving China in favour of lower-cost markets such as India and Vietnam, the survey respondents remain firmly in favour of China.

Six in 10 of the firms are either currently expanding their supply chains in China or plan to do so over the next year.

China’s commitment to achieve carbon neutrality makes expanding there more attractive for multinationals, with increasing business opportunities to arise from the net-zero agenda, the report said.

China’s booming digital economy also prompted them to enhance their digital capabilities to capture growing demand.

The continued growth in inbound investment can also seen in the official data, with actually utilised foreign capital in the first nine months of this year on track to exceed the record set in 2020.

The survey was conducted online from Sept 9 – 14 with respondents across 10 markets, including the US, the UK, Singapore, and Australia, HSBC said.

The survey did not include responses from Japanese, South Korean or Taiwanese firms, all of which are big investors in mainland China.

The survey was of companies either doing business in China or who intend to do so in the future.

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