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New factories pick up pace with high-tech

By Zhong Nan | China Daily Global | Updated: 2019-09-11 08:49

Global firms' investment focus in China has shifted to building upgraded plants

It takes less than one minute for ABB Group's industrial robots to put four tires on a sport utility vehicle on an assembly line at Dongfeng Nissan Vehicle Co's Dalian plant in Northeast China's Liaoning province. Pushed by more automation equipment, the factory is now able to produce more than 35 cars per hour.

After years of watching their labor costs go up, domestic and global companies alike have been rushing to fill their workshops and warehouses with new models of industrial and service robots to remain competitive and save costs across China.

More than 1,000 kilometers from Dalian, ABB Group, the Swiss industrial conglomerate, is building a $150 million robotics factory under the theme of "robots making robots" in Shanghai, with an eagerness to sell more robots to China and other parts of the world.

Designed to produce 100,000 industrial and service-function robots a year, the new ABB factory is expected to begin production by the end of 2020.

ABB is not alone. Other global companies such as France's Schneider Electric SA, the Netherlands-based Signify NV and General Electric Co of the United States have all shifted their investment focus from building conventional plants to establishing high-end factories and innovation and service facilities in China. This comes as China's economy has entered a new era of consumption-and innovation-driven growth.

Many opportunities also come from new government measures such as adding six pilot free trade zones in provinces including Yunnan and Heilongjiang in late August, opening up more sectors, and allowing more overseas companies to build wholly owned units in China since 2017, said Chen Wenling, chief economist at the China Center for International Economic Exchanges in Beijing.

China's stable domestic market and firm support for multilateralism, surging trade activities with partners related to the Belt and Road Initiative, and fast-growing 5G technology have all raised global companies' appetite to invest in China and avoid the impact caused by the ongoing China-US trade dispute, she said.

Though many economies are still seeking ways to cast off the negative influence brought by trade protectionism and unilateralism, the New York-based independent research provider Rhodium Group found that foreign direct investment in China by US businesses such as Tesla Inc and Bain Capital had grown 1.5 percent to $6.8 billion between January and June this year - higher than the average growth rate for the same period in the past two years - attracted by the country's lucrative consumer market.

UL LLC, the safety certification group based in the US state of Illinois, is expected to run its first global battery laboratory for power and energy storage in Changzhou, Jiangsu province, in April 2020.

"The pushing power behind this move is China's fast-growing sales of new energy and high-end hybrid vehicles, on the back of government policy support for quality development, entrants with strong financial resources, and rapid development of digital and material technologies," said UL CEO Keith Williams.

He said Changzhou is a center of excellence in China for building electric vehicles, batteries and chargers, so it is a natural choice for the company to locate operations closer to its clients.

"We will build more labs in China," said Williams, adding that the 14,000-employee company will invest more because many of China's industries are moving inland and it wants to follow the trend.

His idea is shared by Ian Shih, the president for China of Rockwell Automation Inc, who said that since many Chinese companies are eager to upgrade their products and boost work efficiency, investing in new factories is no longer their top priority in China.

Demand in the country for the development of high-end manufacturing is among the world's fastest-growing.

In addition to introducing more digital solutions to China, the US industrial automation and information service provider opened a late-point configuration center in late 2018, since demand for high-powered drives has surged in the past several years. The assembly line enables its Shanghai factory to build high-power, low-voltage drives for the China market.

Foreign direct investment inflows to the Chinese mainland rose 7.3 percent year-on-year to 533.14 billion yuan ($74.9 billion) between January and July this year, while foreign investment in high-tech industries rose 43 percent year-on-year, accounting for more than 29 percent of the total FDI, Ministry of Commerce data shows.

In the meantime, the high-tech services sector received 59 billion yuan in FDI, up more than 19 percent year-on-year.

Given China's ongoing manufacturing transformation and the growing number of middle-income earners, Guo Zhongxiao, director of the administrative committee of the China-Germany High-End Equipment Manufacturing Park in Shenyang, Liaoning province, said the park has already attracted 127 German-funded, joint venture or foreign-funded companies. About 80 percent of their businesses are involved in the automobile industry.

BMW Brilliance Automobile, the park's flagship company, is investing heavily in Shenyang. BMW AG already runs assembly plants with a production capability of 400,000 cars per year in the industrial park, as well as its only power train plant outside Europe, and its largest research and development center outside Germany.

"These facts show that the majority of global companies' investment decisions are based on market condition and growth potential, and they are acutely aware that no economy can independently provide all the resources and ideas of innovation for producers, or offer all the needed goods and services to consumers," said Xu Mingqi, a researcher with the Shanghai Academy of Social Sciences.

He said that since isolationism cannot sustain any country's development in the global value chain, China will open its doors wider to foreign investors, as the country looks to achieve high-quality growth, with more policies coming in such areas as financing, manufacturing and services.

Apart from attracting global capital, overseas companies are increasingly finding it crucial to have strong research and development teams in the country, as China shifts from an export-driven economy to one focused on technology breakthroughs, said Zhang Yanyan, senior vice-president for human resources at Schneider Electric China. There are many job opportunities in those areas, Zhang added.

"Traditionally, money plays a big role in dominating candidates' decisions," she said. "However, there are other factors as important as the level of income. They also look at career progression and people who work with them, what the company does, and if the company has a purpose that they have an affinity with, especially for millennials."

zhongnan@chinadaily.com.cn

(China Daily Global 09/11/2019 page1)

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