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Hello, new path is not a bad thing

By Zhong Nan | China Daily | Updated: 2017-12-25 07:58

Asked about their China investment plans, foreign executives' typical response can be summarized as "We are in China, for China".

This is particularly true of those heading global corporations' operations in China, especially those from the United States.

Many of them have stopped citing figures. Instead, they wax eloquent on the market trends.

For years, foreign investors and manufacturers mainly sought cheap labor in China. Not anymore.

Their focus is shifting to the consumer market just as China's economic focus is shifting to consumption-driven growth.

For sometime now, business fora and experts had been expressing concerns that China may be slowly losing its attraction as an FDI, or foreign direct investment, destination for low-end industrial products.

Now, is that a bad thing? To rephrase the question a bit: isn't that a good thing?

FDI concerns were triggered by slower global goods demand and other factors such as rising labor and raw material costs. But I'm glad many MNCs have moved their chemical plants, paper mills, printing and dyeing mills from China to neighboring countries.

It's time China pursues a sustainable development model (like, say, Germany and France have been doing for decades).

Apparently, such a massive transformation won't be easy for China. There was a time when its workforce used to eke out a living by working in old-fashioned factories. But, China's changing economic priorities would mean the workforce issue needs to be handled well during reforms.

For, in 1998, when China accelerated reform of State-owned enterprises, it resulted in improved efficiency. But, crucially, as SOEs were merged or shuttered due to bankruptcy, about 27.8 million workers also lost their jobs.

Now, China's booming services sector is fully capable of minimizing the unemployment rate as the country has strengthened the development of business-friendly platforms. There are diverse business development models. Companies of various sizes are part of an ecosystem that is marked by a clear division of labor and shared benefits.

To be sure, FDI in China has not slowed. Rather, it has taken a different path, one that could put the country at the forefront of high-tech investments by foreign companies.

More importantly, there has also been a sea change in the direction of FDI flows. With low-cost manufacturing losing its edge, FDI now is moving away from the prosperous coastal and eastern regions of China to the lesser-developed inland and western regions.

After driving years of development, the Chinese government now understands that global companies have the potential to play a key role in the renewal of the economy.

But foreign businesses must also be aware that China needs reliable partners that think long-term and do not sidestep challenges like rising labor cost that lie ahead.

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