From Chongqing Association of Enterprises with Foreign Investment
According to recently-released Chongqing Foreign Investment Environment Evaluation Report 2018, 61% of respondents indicated that they had the intention to expand the enterprise’s scale, invest in new projects, and conduct mergers and acquisitions in China.
59% of respondents indicated optimistic attitude to the Chinese future development in next two years. Although China’s economic growth is slowing in recent years, China still has a leading economic growth in the world. As Chinese government continuously expands China’s opening-up level and announces various preferential policies to promote the growth of foreign investment, reducing tariffs and restrictions on foreign investment access, reforming domestic taxes and levies, and reducing the burden on enterprises, thus the foreign investors and foreign-funded enterprises are still confident and optimistic to their future development in China.
Depending on the optimistic attitude on Chinese development prospect, 61% of respondents have the intention to expand the enterprises scale and invest in new projects. Chongqing shall seize this opportunity, consistently expand the opening- up level, reinforce the investment promotion, and introduce the optimizing service measures so as to attract the foreign investment.
Based on the survey, if the respondents are going to conduct further investment in China, the top five provinces/municipalities of China preferred by the respondents are as follows:
If the respondents intend to continue their investment in China, most of them would still choose Chongqing for further investment.
First of all, most respondents, who registered and has been operating in Chongqing, have completed the integration of upstream and downstream supply chains and have owned certain customer resources in Chongqing. Therefore, most respondents chose Chongqing as the top priority for their follow-up investment is due to that it would benefit the respondents in utilizing their existing resources in Chongqing so as to enlarge the agglomeration effect and reduce enterprise costs.
Furthermore, Chongqing is building the Yangtze River Economic Zone and strengthening infrastructure construction to maintain a good and comprehensive investment environment for foreign-invested enterprises in the following six aspects: (1) to accelerate the construction of the comprehensive transportation hub along the upper reaches of Yangtze River; (2) to establish an inland opening-up area; (3) to enhance the radiation function of the strategic fulcrum; (4) to cultivate the characteristic and advantaged industrial clusters; (5) to promote urban agglomeration construction and (6) to build the ecological security shelter along the upper reaches of Yangtze River. Meanwhile, the average commodity price and labor cost in Chongqing are lower than those in Beijing, Shanghai, Guangzhou and Shenzhen, which is another important reason for foreign-invested enterprises to choose Chongqing for future follow-up investment.
Besides Chongqing, Sichuan is the second choice of respondents. Comparing with 2017, the ratio of respondents who intend to further invest in Chongqing decreased by 2% while increased by 1% in Sichuan. Sichuan is close to Chongqing, and it also has regional advantages, for example, Sichuan has a great consumer market potential with relatively low production costs. It also has incentives under China Western Region Development Policies. Because of the larger areas it has, Sichuan, with a close distance to Chongqing, has become the first re-investment choice for those enterprises which have already invested in Chongqing.
In addition to Chongqing and Sichuan, the respondents preferred Shanghai, Guangdong, and other eastern coastal developed provinces/municipalities. These developed areas have strong consumption capacity, vast markets, high-level management and high talent quality, which are attracting foreign investment. Besides, as the capital of China, Beijing took place of Jiangsu to become the 5th of planned investment province/municipality, which is probably because it is easy to receive the updated government policy and to recruit excellent management personnel in Beijing.
Based on the survey, if the respondents are going to increase their investment in Chongqing, the top five districts/counties of Chongqing preferred by the respondents are as follows:
23% of respondents, who are going to increase their investment in Chongqing, selected Yubei District as their preferred investment destination, but the ratio is reduced by 3% comparing with 2017. The percentage is still much higher than that for other districts. Yubei District is a main urban zone, one of the metropolitan areas in Chongqing. Yubei District is also the main part of Liangjiang New Area, the first national Airport Economic Demonstration Zone, the biggest automobile manufacturing base, the important intelligent terminal manufacturing, importing and exporting base. Yubei District has Jiangbei International Airport, bonded port area, Yuelai International Expo Center, and other municipal opening-up platform. It is the important junction of Chongqing Pilot Free Trade Zone and China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity. It is the area which has the biggest economic size, the most development platform, and the most distinct reginal advantages.
Meanwhile, 13% of respondents in 2018 chose Jiangbei District. It is also one of the main urban zones. Jiangbei District has many conveniences and advantages, such as being the junction of “the Belt and Road” and Yangtze River Economic Belt, the main part of Liangjiang New Area, main field of China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity, the main part of Chongqing Pilot Free Trade Zone and municipal opening-up platforms (including Jiangbeizui Central Business Area, Yufu Industrial Park). Also, it has a very convenient transportation system. Nowadays, Jiangbei District’s strategic emerging service industries like new finance, information service, and professional service are booming.
Some respondents also preferred to Yuzhong District, Jiulongpo District and Shapingba District. Only a few respondents chose the non-core area around the main urban zone, and most of them are engaging in manufacturing, because the non- core area can supply sufficient land source and relatively cheap labor force which could satisfy the needs of manufacturing enterprises.
Based on the survey, the majority of respondents considered that the approval procedures should be further simplified. The communication channel with the government is not smooth enough. The need for talent and the need for elimination of supervision and policy barriers is rising year by year.
With the continuous introduction of tax reduction and fee reduction policy, enterprises have a decreasing need for financial support, however, a few enterprises show an opposite attitude.
It’s suggested that the Chongqing government should optimize the effectiveness of communication channel with enterprises, organize conversaziones among finance bureau, tax bureau, investment department and foreign-invested enterprises to introduce Chongqing’s investment plan as well as available fiscal and tax support policies. Meanwhile, simplify the approval processes to make enterprises invest in Chongqing effectively, to promote the economic development of Chongqing.
It appears that the United States launched the tax reform, hoping to attract American enterprises to move back to the United States, to create job opportunities and stimulate the economy. Besides, to avoid the influence of trade frictions, some enterprises consider to transfer investment to regions with lower labor prices such as Southeast Asia.
However, most respondents indicated that the above-mentioned factors will not affect their investment intention in China because China’s market, potential, talent quality and efficiency are still the important elements to attract foreign investors.