Business China

The Mystery of Foreign Investment in Establishing Sophisticated Factories in China

+86-020-2917 9715
Recently, many foreign companies have invested in sophisticated factories in China. Despite China's labor costs continue to rise, but the growth of domestic consumer purchasing power and the government's targeted investment policy attracted these foreign enterprises continue to be optimistic about China, they invest and build factories in China. The difference is that the advanced factories now replace the low-end factories in the past. So, does this mean China is moving up the global value chain?

The market

Indeed, China is moving up the global value chain. But rather than focusing on China moving up the global value chain, foreign companies are more likely to value China's market in the process of moving up the global value chain.

The attraction of the market is hard to resist. Even though China's economic growth has shifted to medium-high speed in recent years, but the size of the world's second largest economies and the huge growth base derived from the huge market scale, which companies cannot ignore.

With the rapid development of the economy, people's living standards have improved significantly and their consumption capacity has soared. In the past, we may need something that meets the basic needs of life, and now we need things that are better and have better quality. The change in demand side brings a series of changes on the supply side, from life data to production materials, we can only better meet the demand by improving the supply. This is especially true for market-orientated foreign companies.

As we shift from the "world factory" to "world market", the production technology level of domestic enterprises is gradually improving, and the gap between the advanced level of the world is gradually narrowing. It is moving from the lower end of the global value chain to the higher end. The market is changing rapidly and the market share is real. In the face of a huge market like China, where consumer demand is rising, how can foreign companies hold their own in the Chinese market without taking some of the high quality.

In addition, the Chinese government has adopted a proactive investment promotion policy towards high technology. so, from the organic EL panel to the large capacity flash memory, from electric cars to industrial robots, etc., many foreign companies invest in cutting-edge factory in China, they seize market, close to the consumer.

The position

The United States is at the top of the global value chain, especially in the high-tech sector; Developed countries such as the EU and Japan are upstream, leading in technology-intensive areas; China is in the middle and lower reaches, but the trend towards the upper reaches is clear.

It should be said that the long-term low cost is the advantage that we start to add to the global value chain, and we have benefited a lot. However, as a whole, it is still in the middle and lower reaches of the global value chain, leaving many of our products with low technological content and low added value.

China's position in the global value chain largely explains why the Chinese are industrious and not rich. For a long time, it was the downstream of the global value chain that led to the hard work of working for others.

For example, research has shown that the domestic assembly of the iphone makes up only 1.8 per cent of the profit of the whole machine, and the ipad is lower to 1.6 per cent, and the vast majority of profits go to apple in the US. This is not limited to apple phones, but also to other products.

The upgrading process of developing countries in the global value chain is mainly manifested in the specific ascending form of processing of incoming materials, label making, self-designed manufacturing and own-brand manufacturing. So far, we have generally followed such a path, in the transition from a manufacturing powerhouse to a manufacturing powerhouse.

At present, a new round of scientific and technological revolution and industrial transformation is developing in a global context, with developed countries implementing reindustrialization and developing countries speeding up the process of industrialization. China faces the dual squeeze of advanced technology in developed countries and low-cost competition in developing countries. The situation demands that we should accelerate the pace of global value chain.

The innovation

The key to cultivating competitive advantage and moving up the global value chain is to improve the ability of independent innovation.

Foreign companies investing in sophisticated factories in China, in spite of the potential for technological spillovers, domestic enterprises will be promoted to imitate, learn from and absorb advanced technologies to promote industrial upgrading and product upgrading. However, we must pay attention to the two facts: one is the core technology in the hands of foreign companies, the technology spillover effect of domestic enterprises is limited, so it always exists with foreign advanced technology. The second is that foreign enterprises monopolize the high value-added links in the value chain such as R & D, design and marketing through patent, brand, market and other means, they lock domestic companies in low - value added links, which may inhibit the transformation and upgrading of domestic enterprises.

It is better to have one than to have others. Therefore, if China wants to move up the global value chain, it must take its own path of innovation. The current road of transformation and upgrading, there is a "straight line chase" which is formed in the traditional industry, and the "curve overtaking" which is formed in the emerging industries. Either way, it is inseparable from the core of independent innovation. Here, "made in China 2025" will play an important role in promoting innovation-driven, intelligent transformation, strengthening foundation and green development.

Independent innovation, both government and enterprises need to work harder. For the government, it will be of great significance to deepen institutional reform, create a fair and just business environment, and stimulate the vitality of independent innovation of market players. For enterprises, increasing innovation input and improving the competitive ability of design, R&D, manufacturing, marketing, etc., is due regard as an innovative subject. Thus, the shift of China's economic growth is on the occasion, we should make good use of structure optimization and kinetic energy transformation, we should take independent innovation as the traction, and speed up from the manufacturer to the shift of manufacturing power, and push us to the global value chain.

More about China manufacturing company:

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.