Business China

Manufacturing Uses Only Half as much Foreign Capital as Services

+86-020-2917 9715
At one time, the introduction of capital and foreign exchange had played a key role in China's economic take-off. Now, with China's economic restructuring and industrial upgrading, foreign capital is confronted with a structural "turning point" in China and a new round of "China opportunities". China needs more advanced technology and ideas to get a better position in the world industrial chain. In this context, it is necessary to accelerate the reconstruction of foreign capital: from manufacturing to service industry, from cost orientation towards R&D orientation, from "attracting wealth" to "leading" and "priming".

Under the new normal economy, foreign capital is encountering a "structural inflection point" in China, according to the Ministry of Commerce. In 2015, the manufacturing industry used only half the foreign capital compared with services. In a recent interview with the economic information daily, the reporter found that the proportion of foreign investment in China's manufacturing industry declined, but the proportion of high-end manufacturing increased significantly. Investment in traditional industries fell sharply, but the new service industry attracted foreign investment. Labor-intensive production lines have been largely transferred, but corporate headquarters and research and development centers have increased dramatically. The phenomenon of "three drops three liters" reflects not only the new "China opportunity", but also new ideas for future Chinese investment.

Turning point 1: low-end manufacturing turns to high-end manufacturing

Nokia has closed its factories in Dongguan, Beijing and Suzhou, Guangdong. Panasonic, Daikin and other Japanese manufacturing companies have moved some of China's production capacity back to Japan. Nike, Foxconn and other manufacturing companies open new plants in southeast Asia or India...

In recent years, as the cost of domestic elements has risen, some manufacturing foreign investment has turned to the lower cost of southeast Asia. The United States, Germany and other developed countries have encouraged manufacturing to return, and some foreign investment has returned.

According to the Ministry of Commerce, manufacturing has been declining in China's use of foreign capital in recent years. Last year, the actual use of foreign investment in the manufacturing sector was $39.54 billion, down to about half of the service sector. It is worth noting that foreign investment in traditional manufacturing industries such as steel, cement, electrolytic aluminum, shipbuilding and plate glass is basically zero.

While overall foreign investment in manufacturing has declined, the proportion of high-end manufacturing has been rising. Last year, high-tech manufacturing took advantage of a 9.5 percent increase in foreign investment, rising to 23.8 percent in the manufacturing sector.

Based in Belgium, the company founded a 3D printing technology company in Shanghai in November 2014. "Industrial transformation and innovation and entrepreneurship have promoted the upgrading of China's manufacturing industry, which has brought a broad market to the application of 3D printing technology. "Said Jean, the company's general manager.

When Marris enters the Chinese market, it mainly offers 3D printing software solutions to the medical and industrial sectors. At present, we have established a research center with Shanghai No. 9 People's Hospital and Shanghai Children's Hospital, which has dozens of partners.

Turning point two: shifting from traditional manufacturing to new service industry

In the past, China has attracted more foreign investment in manufacturing, and foreign companies have pushed China to become the world's factory. Now, the service sector attracts foreign investment rapidly, and has become the main source of capital. According to the Ministry of Commerce, the service industry actually used foreign investment of $77.18 billion last year, up 17.3 percent from a year earlier, accounting for 61.1 percent of the national total.

As a big province of foreign capital, Jin Zhao, inspector of the Jiangsu Provincial Department of Commerce, said that Jiangsu has entered the late stage of industrialization, transforming from the industrial economy to the service economy, and the growth of foreign investment in the service industry is very fast. Under the new normal environment, foreign investment in Jiangsu should be further transformed and upgraded, and accelerate the development of modern service industry with the transformation and upgrading of manufacturing industry. This year, Jiangsu will hold a meeting in the service industry to promote the opening up of services.

The structure of foreign investment in services has also changed a lot.

Hong Ben, deputy director of Xiamen municipal bureau of commerce, said that the fastest growth of foreign investment in the service contract in Xiamen was computer services, software and business services, and more than seven times year-on-year. There are also new industries, such as sports, finance, pension and medical care, which account for an increasing proportion of foreign investment. The decline was obvious in the real estate sector, with the annual construction of Xiamen real estate contract taking in only $23.51 million, down 97.4 percent year on year.

In November last year, Taiwan Eslite Bookstore opened its first store on the mainland in Jinji Lake, Suzhou. The area covers a total of 56,000 square meters, including bookstores, stationery shops, cafes, restaurants, exhibition halls and so on. The store has cooperated with more than 2,000 publishing houses around the world, leading more than 50,000 books to communicate across the sea.

Turning point three: shift from labor intensive to headquarters type

In addition to the adjustment and change of the industry, the structural changes have also occurred inside the foreign-funded enterprises. Some foreign companies have shifted labor-intensive production lines, while in China they have added corporate headquarters and R&D centers.

It is clear that foreign companies have moved their headquarters and regional headquarters to China. Taking Shanghai as an example, the Shanghai business commission data show that by the end of last year, there were 535 regional headquarters in Shanghai, and the "headquarters economy" had become the business card of Shanghai.

Research and development centers in traditional industries have also accelerated to China. According to statistics, there are more than 2,400 research and development institutions in China. The research and development center has been developed from the early domestic manufacturing industry to Asia and the world, and some R&D centers have developed the tendency to upgrade to the R&D headquarters.

Jiang Han, director of the economic development bureau of Suzhou industrial park, said that a prominent Korean electronics company in the park has cut annual sales revenue by 40% a year for two years, but profits have increased by about 10% a year. The company has moved its labor-intensive, thinly profitable production lines to Vietnam and put its R&D centers, ultra-thin and touch-sensitive new products in the park.

In the long run, it is a development law for enterprises to move to places with lower integrated costs. What we need to do now is to improve operational efficiency in Dongguan." "said by Chuck gillis, senior vice President of Levi footwear co., which has been working in Dongguan for more than 20 years.

Levi's parent company, Brown Shoes, is one of the largest shoe trading companies in the world. In recent years, the role of Dongguan in its global layout has been constantly changing, initially focusing on manufacturing, and now it is the most important design and research center of brown shoe industry in the world. We closed the Taiwan office a few years ago, and the Italian design department has about 20 people. Dongguan company is expanding, and now more than 600 employees come from 14 countries and regions. Still, Mr Gillies admits that, in the past few decades, companies have moved from the us to Taiwan to mainland China, where costs are now rising, it is not ruled out that it will be moved to southeast Asia.

Experts such as professor Sang Baichuan of foreign economic and Trade University believe that, at present, we can further study the path of transformation and upgrading of foreign capital, and actively grasp the development trend of foreign investment. Through the foreign technology spillover effect, China's social productivity level is enhanced, and the global positioning of multinational companies is deeply integrated into the global distribution of multinational companies, thus consolidating and enhancing China's position in the global value chain.

Please do feel free to email us to or call us to 0086-020-2917 9715 at any time, we love helping new friends. Or enter your details below and let's get started!
  • James Oliver "True professionals, very helpful and dedicated. Your support team is fantastic."
  • Robert Gatti "Our advisor was brilliant and we were given more help that we knew we needed. What I liked most about Business China's service was the prompt and businesslike approach.It helped us dramatically. At a...
  • Vivian Belfanti "Quality work and friendliness is why I chose to work with Business China. Business China is organized very easy to work with."
  • Tim Orchard "Thanks to Business China’s professional guiding and efficient processing about company incorporation and VAT refunding, our new entity in Guangzhou already step into a virtuous circle. I have to say...
  • Victor Declety "Business China allows us to focus on our customers instead of being tangled into enterprise level business incorporation and maintance."
  • Ben Hunter "Business China is helping people who don't necessarily know how to connect your current business with the booming Chinese market and how to lay out your 'China Dream' here specifically. It has been...
  • Daniel Wong "A great customer experience! The flexability and speed of response from the account manager, as well as the quality of the service process was exceptional."
  • Stacey Morris "Businesss China has been superb. Their customer service is great. The guys there respond very quickly and go above and beyond that help."
  • M. Salem Having real-time information allows us to deal with issues immediately before they become problems.We are satisfy with Business China.
Request a Proposal

Drop Business China a quick message to let us know about your incorporation needs.