Business
China ramps up efforts to improve appeal to foreign investors
By Li Xiaoyang  ·  2025-03-03  ·   Source: NO.10 MARCH 6, 2025
U.S. carmaker Tesla's new Megafactory, dedicated to manufacturing energy-storage batteries known as Megapacks, in Shanghai, on February 8 (XINHUA)

U.S. carmaker Tesla's new Megafactory in Shanghai, dedicated to manufacturing energy-storage batteries known as Megapacks, began production on February 11. The new plant is the company's second major facility in Shanghai and the first of its kind outside the United States.

Covering about 200,000 square meters, the project involved a total investment of 1.45 billion yuan ($200 million). Up to 10,000 Megapack storage units are scheduled to be produced there annually.

This was not the only good news for Tesla, though. On February 19, Chinese authorities introduced an action plan for expanding high-standard opening up and ensuring foreign investment stability, to improve expectations of foreign-funded enterprises seeking expansion in China, including the electric vehicle giant.

The new action plan, with 20 specific measures in four categories, includes further expanding market access in multiple sectors and increasing efforts to promote investment.

"The action plan, rolled out amid growing global uncertainty, will improve expectations of multinationals investing and operating in China," Nie Pingxiang, a researcher with the Chinese Academy of International Trade and Economic Cooperation, told Beijing Review, stressing that China remains a major foreign investment destination with its vast market, stable economic growth and complete industrial and supply chains.

Stronger support

Among the measures, foreign equity investment in China will be encouraged to attract more high-quality foreign direct investment (FDI) in the country's listed companies.

The country will continue expanding its pilot programs to open up fields such as telecommunication and medical services in a timely manner. It will also lift restrictions on domestic loans for foreign-invested enterprises, allowing the firms to use domestic financing for equity investments, according to the plan.

According to Nie, the measures focus on opening up more sectors and leveraging the role of national-level economic and technological development zones and free trade zones in attracting foreign investment. Other priorities include improving supportive policies and providing guarantee services for foreign-funded enterprises.

Despite rising geopolitical uncertainty, China has been expanding opening up and improving domestic business environment. Since 2024, the authorities have expanded opening up in sectors like healthcare, lift foreign investment access restrictions in manufacturing, and reduce nationwide foreign investment access restrictions from 31 to 29 items.

"Foreign investment has been contributing to and benefited from China's reform and opening up," Ling Ji, Vice Minister of Commerce and Deputy China International Trade Representative, told a press conference in Beijing on February 20.

According to Ling, foreign-invested enterprises now contribute nearly 7 percent of China's employment, one seventh of the country's tax revenue and about one third of its imports and exports.

Data from the Ministry of Commerce (MOFCOM) showed that a total of 59,080 new foreign-invested firms were established across China in 2024, up 9.9 percent year on year.

China remains an important market for U.S. companies, with nearly half of respondents ranking it as a top-three global investment priority, according to the China Business Climate Survey Report released by the American Chamber of Commerce in China (AmCham China) on January 23.

More than half of the surveyed U.S. enterprises are concerned about possible further deterioration in relations between the two economies. Still, over half of the companies expect to increase investment in their China operations in 2025, the report read.

The AmCham South China, which represents more than 2,300 American and International companies doing business in south China, also released on February 26 its 2025 Special Report on the State of Business in South China, gathering feedback from 316 companies in 2024. The surveyed companies are mainly from the U.S., China and the European Union.

The proportion of companies that generated over 60 percent of their global revenue from China increased by 5 percentage points last year, reaching 31 percent, the report said.

Fifty-eight percent of the companies rank China among their top-three investment priorities. In 2025, 76 percent of the companies intend to reinvest in China, with 74 percent of the American companies planning reinvestments, up 11 percentage points year on year.

Harley Seyedin, Chairman and President of AmCham South China, said in an interview with Xinhua News Agency that over 73 percent of AmCham's member companies in south China focus no longer on exports, but producing goods or providing services for the Chinese market.

"Businesses are increasing their commitments in China for a stronger foothold in this critical market. The reinvestment surge signals confidence in China," he said.

Localized operations

Foreign-funded companies have been localizing their products and services to better cater to preferences and needs of Chinese consumers.

For the 2025 Chinese New Year, which fell on January 29, Danish toymaker LEGO Group launched a festive event in Yu Garden, an iconic tourist attraction in Shanghai. Running until February 12, it showcased its festival-themed sets blended with traditional Chinese intangible cultural heritage elements. The brand also rolled out exclusive Chinese New Year-themed displays across its authorized stores in China.

LEGO Group now operates more than 400 stores in nearly 120 Chinese cities. The company is expanding production capacity at its factory in Jiaxing, a city in Zhejiang Province, and is building a LEGOLAND in Shanghai, which is slated to open this summer. It has also developed a local digital technology team as one of its four digital centers.

According to LEGO Group, Chinese consumers are increasingly seeking customized retail services. It is confident in the opportunities in China, and will keep exploring the huge market potential.

U.S. coffee chain Starbucks has also increased its bet on the Chinese market by continuing to grow its presence. As of the first quarter of its 2025 fiscal year, which ended on December 29, 2024, the number of Starbucks China stores had reached 7,685, covering over 1,000 county-level regions.

The company accelerated its expansion into small cities and counties, where the performance of new stores continued to exceed that of those in larger cities, according to Starbucks.

In September 2024, the brand launched innovative offerings tailored for Chinese consumers, including the Pomelo Oolong Tea Latte and the Persimmon Frappuccino. The localized creations quickly captured attention, drawing in crowds eager to experience the unique flavors.

As one of the first global energy equipment and service providers to enter the Chinese market, U.S.-based GE Vernova Inc., is exploring to get involved in China's energy sector, and participate in developing the country's new power system.

According to the GE Vernova, China is one of the world's biggest and most dynamic energy markets, and it has been and will continue to be one of the most important markets for the company.

In China, GE Vernova has about 4,000 employees in more than 10 offices, research and development and manufacturing sites. It has six HA-class gas turbine projects across China, with a cumulative power capacity of over 9.7 gigawatts.

More appeal

China needs to stick to its own track on stabilizing foreign investment, mainly by addressing the challenges faced by multinationals, expanding opening up, and improving the business environment, Nie said.

In 2024, paid-in FDI in the Chinese mainland exceeded 826 billion yuan ($114 billion), down 27.1 percent year on year. But FDI inflows soared 98.7 percent year on year in the medical equipment and instrument manufacturing sector, 40.8 percent in the professional technical services sector and 21.9 percent in the computer and office equipment manufacturing sector.

In January this year, paid-in FDI totaled 97.59 billion yuan ($13.61 billion), up 27.5 percent from late December, MOFCOM data showed. In the same month, paid-in FDI in the manufacturing and hi-tech manufacturing sectors grew 2.6 and 0.8 percentage points, respectively, from the end of 2024.

Nie stressed that global supply and industrial chain upgrading makes it necessary to optimize and upgrade FDI structure to stabilize China's foreign investment.

"More measures should center on attracting higher-quality foreign investment to meet domestic demand, boost new growth drivers, and encourage new investment such as cross-border mergers and acquisitions," she said. BR

(Print Edition Title: A Destination for Development)            

Copyedited by G.P. Wilson

Comments to lixiaoyang@cicgamericas.com

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