American companies are still pouring money into China
Chinese still prefer American goods, and American businesses do not want to ignore the huge consumer market, despite Covid-19 and the trade war.
Last weekend, the Popeyes Louisiana Kitchen fast food chain opened a store in Shanghai. Hundreds of people lined up outside, ignoring the advice of social spacing during the epidemic to get their hands on these American-branded chicken sandwiches. Popeyes plans to open up to 1,500 facilities in China.
"Chinese people still like American goods," said Oliver Kong (18 years old) - one of the people waiting in line outside, "I like McDonald’s, but I also want to try a new name."
Companies like Popeyes, Walmart, Tesla or Exxon Mobil are betting on the country's long-term growth potential. This expectation overwhelms concerns about escalating geopolitical tensions and slowing economic growth. The pandemic made companies rethink about reducing supply chain dependence on China. However, companies that are making Chinese products for Chinese customers are still trying to increase their presence.
Popeyes' store opened in Shanghai last week. Photo: Reuters
"If you do not operate in this market, Chinese people will come to your market. It is better to compete here instead of waiting until they appear at your door," said Jörg Wuttke - President of the Chamber of Commerce. trade in China said. Although some companies will stop pouring money into China until the outlook is clear, "we still have to be optimistic about the investment."
China's GDP fell 6.8% in the first quarter - for the first time in four decades - because of Covid-19. Economists warn that the recovery momentum will face many challenges, due to rising unemployment and declining consumer confidence.
The political risks of operating in China in recent years have also increased, due to the trade war with the US and, most recently, the global debate over the origin and how to deal with the pandemic. On Fox News last week, US President Donald Trump also threatened to "cut ties" with Beijing. China's Global Times reported that it was ready to target American companies like Apple or Boeing in retaliation for the US holding back Huawei's operations.
Still, businesses have so far not been affected by these political conflicts. China wants to attract foreign investors, and still actively engage the US company in the pandemic. Earlier this year, they introduced foreign investment law with provisions on trademark and intellectual property protection, and committed to increasing policy transparency.
"The Chinese government is quite enthusiastic about companies that fit their strategy and support future industries," said Ker Gibbs, president of the American Chamber of Commerce in Shanghai. Many foreign companies in China fear this may change as US-China relations deteriorate. However, in general, US businesses still want to stick with China.
On May 18, Chinese Commerce Minister Chung Son told reporters that he was not worried about foreign companies leaving. "Smart businesses will not give up on the huge Chinese market," he said.
Foreign direct investment (FDI) from the US and China has been quite stable over the past decade, reaching an average of US $ 14 billion a year. This figure accounts for 10-12% of FDI into China.
According to Rhodium Group, some of the slowdowns may be due to companies becoming increasingly pessimistic about China. A survey conducted in April by the American Chamber of Commerce in China found that 40% of companies said that the unfavorable pandemic movement will cause them to slow down their investment there. But 36% confirmed that they continued to plan.
Coffee chain Tim Hortons (of Restaurant Brands International) last week said it would open 1,500 stores in China. They currently have only a few dozen facilities. "China is our fastest growing market," said Sami Siddiqui, RBI Asia-Pacific director.
Retailers saw the same opportunity in China, as the demand of the middle class increased. Walmart last month said it plans to double its presence in China, opening 500 new stores here in 5-7 years. This intention is unchanged from what was announced last year. Costco Wholesale opened a supermarket in Shanghai last year and plans to open at least two new facilities.
Electric car maker Tesla is also accelerating the expansion of its factory in Shanghai, in preparation for Model Y production here. The Chinese government also supports Tesla a lot. The automaker recently agreed on a US $ 653 million loan from Industrial and Commercial Bank of China. Last year, they borrowed nearly $ 500 million from these banks.
Chemical firms also did not overlook the opportunity after China recently changed the law, allowing foreigners to own 100% of the factories. Exxon Mobil is promoting negotiations with Huizhou authorities to build a factory here. And even though a pandemic seriously affects the need for resolution
Chemical firms also did not overlook the opportunity after China recently changed the law, allowing foreigners to own 100% of the factories. Exxon Mobil is promoting negotiations with Huizhou authorities to build a factory here. And while the pandemic has seriously affected the Chinese travel and entertainment needs, a spokesman for Universal Parks & Resorts said it still has plans to open a $ 6.5 billion simulation park in Beijing. next year.
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