In March, Apple opened its largest retail store on the Chinese mainland in Shanghai—the company's second largest flagship store after its Fifth Avenue outlet in New York City, the U.S. The new addition brings Apple's store tally in Shanghai and the Chinese market to eight and 57, respectively—a significant milestone for the company, which opened its first store in China in 2008.

During his high-profile China visit, Apple CEO Tim Cook, who opened the doors to the new store in Shanghai and welcomed the first Chinese customers at the opening ceremony, reiterated the company's steadfast commitment to the Chinese market, saying, "We are continuing to invest in China, in the supply chain, in research and development, and in our stores."

Interestingly, Apple is just one of the many foreign companies currently operating in the Chinese market that have demonstrated long-term commitment to the Asian giant in recent times.

A report released in February this year by the American Chamber of Commerce in South China, representing nearly 1,000 companies operating across the region, showed that 62 percent of foreign companies remained committed to the Chinese market. Among these, 66 percent of U.S. companies indicated they had no plans to shift their investments out of China.

According to the report, companies surveyed believed they receive a high return on investment in China and are optimistic about the future of the Chinese market. A whopping 90 percent of the polled U.S. companies achieved profitability in 2023, and 88 percent of all foreign companies surveyed have already made a profit in the Chinese market, with 76 percent planning to reinvest in the country.

Up and coming 

Against the backdrop of daunting challenges facing the global economy, foreign firms' strong confidence in the Chinese market undoubtedly attests to the country's resilient economic development that delivers growth, accompanied by enormous market potential and high-level opening up. Ever since China started to reform and open up its economy in 1978, the Asian country, known for its colossal market with lucrative opportunities across various industries, has increasingly attracted foreign investment, becoming the preferred destination for global investors and an attractive market for foreign companies.

Recent data from China's Ministry of Commerce showed that the number of newly established foreign-invested enterprises in China in 2023 had reached 53,766, up more than 39 percent over the previous year. According to the data, foreign direct investment (FDI) originating from France, Britain, the Netherlands, Switzerland and Australia, expanded by 84.1 percent, 81 percent, 31.5 percent, 21.4 percent, and 17.1 percent, respectively.

The rising trend continues in 2024, with new foreign-invested companies experiencing robust growth. During the first two months of this year, 7,160 new foreign-invested firms were set up across China, up 34.9 percent over 2023, the highest surge in nearly five years. For the specified period, FDI from France, Spain and Australia in the Chinese market soared by 586 percent, 399 percent, and 144.5 percent, respectively.

China's hi-tech industry, poised to remain a focal point for foreign investors, witnessed the establishment of 1,865 new foreign-invested companies in the first two months, up 32 percent compared to the same period of the previous year. Strides in science and technology innovation, China's new growth engine and a core driver of the country's high-quality development and modernization, are contributing to unlocking new opportunities for growth in key sectors, including agriculture, energy and manufacturing.

This makes China, home to some of the world's biggest markets, such as the automotive market, increasingly attractive and competitive. In a recent example, on April 11, German car giant Volkswagen (VW) announced it would invest 2.5 billion euros ($2.7 billion) to expand its production and innovation hub in Hefei, capital of Anhui Province.

With a 40-year history in the Chinese market, VW's most recent investment demonstrates not just the company's long-term commitment but also enhanced efforts to remain competitive in China, its most important market, accounting for some 40 percent of the group's overall sales. China, which currently accounts for 69 percent of global electric vehicle sales, is a highly competitive market for both local and international brands. Ralf Brandstätter, Chairman and CEO of VW Group China, said, "This additional investment in the [Hefei] site underlines our ambition to quickly expand our local innovative strength."

Interestingly, the day after VW's announcement, top U.S. aircraft manufacturer Boeing, with a longstanding partnership with China spanning 50 years, also put into operation its first joint venture in China. The expansion is expected to double production capacity at its plant in Tianjin.

Transitioning 

These recent commitments made by German and American industry giants to the Chinese market add to the list of major foreign manufacturing firms, including U.S. chip maker Micron and electric vehicle manufacturer Tesla, that have dedicated substantial resources to expand production capacities in China over the last year. The reality in China sharply contrasts with the overblown negative reports about the country's supposed economic decline. Data released by the National Bureau of Statistics of China showed that hi-tech manufacturing registered a 7.5-percent year-on-year growth in industrial output during the first two months of 2024, up 1.1 percentage points from December 2023. For the same period, value-added industrial output increased by 7 percent year on year, and retail sales of consumer goods reached $1.14 trillion, a 5.5-percent increase on an annual basis. 

China's current economic indicators tell the story of a vibrant and diverse economy in transition.

The country is moving away from an economy that relies heavily on investment and low-cost manufacturing to one that prioritizes high-quality growth. This new approach emphasizes domestic consumption, the production of high-end technology, the development of a digital economy, and the promotion of greener growth.

This transition is largely underpinned by science and technology innovation.

In just over a decade, China has made remarkable progress in innovation, rising from the 43rd place in 2010 to the 11th in 2022 on the United Nations Global Innovation Index, an annual ranking of innovation capacities worldwide. China, a leading global investor in research and development, second only to the United States, and also the world's top filer of international patents, has made substantial inroads over the last decade in leveraging innovation to fast-track the development of emerging industries and modern infrastructure on an unmatched global scale.

Currently, the world's second largest economy is the fastest growing and most dynamic market for emerging industries, including green technologies and the digital economy, leading to the rapid and large-scale deployment of various emerging digital technologies, such as 5G.

A recent report issued by the GSMA, a trade association representing the interests of mobile network operators worldwide, revealed that this year, the proportion of 5G connections in China is forecast to expand from 45 percent to more than 50 percent and become the dominant mobile technology in the country, with more than 1 billion total connections by the end of 2024.

By 2030, 5G connections in China will account for nearly a third of the global total. Meanwhile, 5G's contribution to China's GDP is expected to reach $260 billion, underscoring the transformative potential of this technology and its impact on the country's economy, technological landscape, global competitiveness, job market and infrastructure development.

China is dedicating additional resources to unlock the full potential of strategic emerging industries and is also focusing on developing new quality productive forces. (In the bigger context of China's economic development, new quality productive forces represent a strategic shift toward a more innovative, technology-driven and sustainable economic model aimed at achieving higher productivity, competitiveness and long-term growth—Ed.)

This initiative will continue to open up new growth opportunities in the world's second largest consumer market, now and in the future, making China increasingly attractive for domestic and international brands alike.

The "next China" is still China.

The author is a global economist and business strategist. This article was first published on Chinadiplomacy.org.cn 

Copyedited by Elsbeth van Paridon 

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