INTERNATIONAL COMPANIES IN GENERAL are not moving out of China despite press reports, a top bank’s top economists said yesterday.
Data shows that most established firms are staying in China – and records indicate there has been a sharp rise in the number of foreign-invested companies in the country.
Registration files show that there were 66,800 foreign-invested enterprises in China at the end of August 2022, a big jump from the 48,000 listed at the end of 2021.
The Asian Development Bank’s chief economist Albert Park said on Tuesday that based on the latest data, he saw no evidence of companies “reshoring their operations” away from the world’s most populous country. He was speaking during the launch of its Asian Economic Integration Report 2023.
The Wall St Journal and other papers have implied that a significant number of international firms are racing to relocate to Vietnam or elsewhere. But the ADB doesn’t see it.
“I think some people argued that there is suggestive evidence of supply chains being diversified, especially for some goods from some multinationals moving out of China to diversify geopolitical risk, but there is no strong evidence of reshoring in my view,” he said, according to a report by theedgemarkets.
He was backed up by ADB economist Rolando Avendano who said that the actual data does not show a moving out effect. Further, incoming foreign direct investment to China is increasing, not decreasing.
Other analysts echoed this view. “Manufacturing and high-tech industries continued to attract high levels of foreign investment despite the overall economic slowdown, and some regions, such as the EU, increased investment in China significantly,” said China Briefing, a newsletter from Dezan Shira, a respected firm specializing in analysis of financial data.
Investment from the EU in 2022 increased by 92.2 percent year-on-year, the company said. In terms of individual countries, the biggest increases in investment in China came from South Korea, Germany, and the UK, “with investment increasing 64.2 percent, 52.9 percent, and 40.7 percent year-on-year, respectively”, China Briefing reported.
The international press has been reporting that “geopolitical risk” is causing significant movement of international companies out of China, but analysts say that this appears to be wishful thinking on their part.
Business people say “geopolitical risk” is a euphemism for concern that the United States will unilaterally change trade laws to make it difficult for international companies to work globally, as it has already done in the cases of solar panel production and semiconductor sales.
Image at the top by Photo by Glsun Mall on Unsplash