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New quality productive forces to rejuvenate market

China Daily | Updated: 2024-08-15 00:00
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Editor's Note: These interviews with CEOs of major foreign firms gauge their outlook for the Chinese economy, their operations in China and their business plans for 2024 and beyond, in the wake of the momentous resolution adopted at the third plenary session of the 20th Communist Party of China Central Committee in mid-July.

Q1 The third plenary session of the 20th Communist Party of China Central Committee in mid-July has rolled out the reform and opening-up roadmap for the Chinese economy in the coming years. What are your major takeaways from the plenum? What are the biggest opportunities you spot in China's new measures to deepen reform and further open up its economy? How do you plan to capitalize on these opportunities in your specific industry?

MADARANG: The third plenary session of the 20th Communist Party of China Central Committee emphasized China's commitment to deepening reforms and enhancing the business environment, which is expected to attract more foreign investment. Goodyear aims to leverage this favorable climate to expand its presence in the growing automotive sector, particularly in the luxury, sport utility vehicle and electric vehicle segments, consistent with China's modernization efforts. Additionally, our focus on innovation and sustainability corresponds with China's green initiatives and creates opportunities for closer collaboration with leading auto manufacturers. We are aiming to introduce the first 100 percent sustainable-material and maintenance-free tires by 2030.

LOH: The plenum promotes "high-quality" development and opening-up of China. The country is drawing up a blueprint for high-quality urban development accelerated by renewal, smart cities, digital transformation, green economy and sustainable development. Otis has been supporting them by innovation and technologies to connect and move people more efficiently and safely across infrastructure facilities, and residential and commercial buildings. China is advocating a large-scale equipment renewal and consumer goods trade-in. We are accelerating the deployment of elevator modernization solutions covering escalator upgrades and adding elevators to existing buildings, as well as integrating the internet of things technology to provide passengers with digital, intelligent, green and high-quality mobility experiences.

TAN: The tone-setting plenum highlighted a strong signal to the world of China's unwavering commitment to upholding the banner of reform and opening-up in the new era to help maintain economic stability. It further encourages innovation, stimulates market vitality and optimizes the business environment.

We believe that China's economy will become stronger and more resilient. The certainty of China's economy and the government's steadfast commitment provide a long-term stable environment for business development in China, offering opportunities for stable brand growth and investment expansion. China's focus on technological innovation and digital transformation will create opportunities for collaboration and investment in advanced technologies.

CHUNG: The plenum holds significant importance for advancing the process of Chinese modernization and promoting high-quality economic development in China. We have witnessed China's firm confidence in expanding opening-up, developing new quality productive forces, promoting green development and vitalizing rural areas.

The third plenary session sent a positive signal favoring foreign-funded enterprises, injecting confidence and motivation for us to continue deepening our presence in the Chinese market. Nippon Paint China has established factories in Xi'an, Shaanxi province, and Dengta, Liaoning province, this year. They are the first production bases set up by the company in China's northwest and northeast regions, respectively.

The meeting emphasized the critical role of new quality productive forces in development, encouraging industrial upgrading and economic growth through scientific and technological innovation, which provides Nippon Paint China with broad market opportunities and new business growth.

 

Q2 In your view, how will the reform and opening-up measures rolled out at the plenum help strengthen the Chinese economy and bolster its prospects of achieving modernization? Do you think China's new reform and opening-up blueprint will make fresh contributions to the global economy? If yes, how?

MADARANG: China's new reform blueprint, outlined at the recent plenum, aims to strengthen the economy and accelerate modernization by creating a more vibrant, innovative and competitive business environment. This development is expected to have a significant positive impact on the global economy, presenting exciting opportunities for companies like Goodyear. As the first foreign tire manufacturer on the Chinese mainland since 1994, Goodyear is well-positioned to help support the development of China's growing automotive sector, particularly in the luxury, SUV and EV segments. Goodyear's expansion in Kunshan, Jiangsu province, and the completion of Goodyear's largest facility with solar panel installation in our Dalian plant in Liaoning province, demonstrate our commitment to the Chinese market and align with the country's sustainability goals.

With China entering a new era of green and innovation-led growth, we believe that smart tire manufacturing and performance will experience significant growth. Goodyear sees tire intelligence as a source of future growth.

LOH: China's efforts to foster a first-rate business environment that is market-oriented, law-based and internationalized will further enhance the attractiveness of the Chinese market globally. We are confident of the continuing development of Otis in China, which is the world's largest elevator equipment market. We remain committed to supporting urbanization, smart cities, city renewal and sustainable development in China. The Otis global research and development center and Industry 4.0-oriented manufacturing facilities in China are our strong backbones to support the country's high-quality development.

TAN: We believe that China's new blueprint for reform and opening-up holds enormous potential to contribute to the global economy. Enhanced market access and deep integration into the global supply chain will facilitate greater international trade and investment flows. China is closely connected to the world as a crucial link in global industrial and supply chains, with Skechers producing 90 percent of its products in China. By prioritizing innovation and digital transformation, China aims to lead in advanced manufacturing, green technology and digital infrastructure. Initiatives like the Belt and Road Initiative and other strengthened economic cooperation frameworks will promote global connectivity and inclusive growth, benefiting China and its global partners.

CHUNG: The plenum emphasized the commitment to opening up by implementing measures such as the removal of all market access restrictions in the manufacturing sector, optimizing the business environment for foreign-funded enterprises, and facilitating international economic and trade cooperation. These measures aim to create a fairer and more transparent institutional environment for foreign-funded enterprises in China. Benefiting from the implementation of these policies, we will increase our investment in scientific and technological innovation, accelerate the introduction of more innovation achievements into China, and enhance the coordinated utilization of global resources to meet the continuously growing market demand.

The China International Import Expo is an important platform for China to promote high-level opening-up. We will participate in the CIIE for the first time this year, showcasing our green innovation achievements to global partners, sharing the development opportunities of the Chinese market, and facilitating global trade flows.

 

Q3 How do you view China's new reform initiatives aimed at fostering new quality productive forces, such as those to encourage industrial upgrade and technological innovation? Do you see these as opportunities or challenges for foreign enterprises, and why?

MADARANG: China's new reform initiatives, focused on fostering new quality productive forces through industrial upgrades and technological innovation, present significant opportunities for foreign companies like Goodyear. We are in the process of developing solutions and products for fleets, autonomous vehicles, connected technologies, electric vehicles and sustainable practices to contribute to the creation of a new mobility ecosystem. Numerous opportunities have also arisen from the eagerness shown by Chinese automakers and technology companies to embrace new technologies that have boosted the utilization of new energy sources and electric vehicles. Moreover, the free trade agreements forged between China and other countries, along with surging demand from businesses for sustainable-material tires, are helping drive the momentum. Our goal is to incorporate data and sensor-enabled intelligence into all new products by 2027, enhancing safety and efficiency for drivers.

LOH: China's new reform initiatives aimed at fostering new quality productive forces will fuel high-quality development of the country. The continuing opening-up to foreign investment provides a favorable business environment. Otis remains committed to supporting China's urbanization and city renewal through innovation and world-class quality elevator and escalator solutions. The Otis R&D Center in Shanghai is the company's largest innovation hub certified with global innovation hub status by the Shanghai municipal government. Among many innovations, Otis' energy-efficient solutions connected elevators and our IoT-based digitization technologies are innovated in China and now serve across global markets.

TAN: China's reform initiatives aimed at nurturing new quality productive forces, including measures to promote industrial upgrading and technological innovation, present significant opportunities for foreign enterprises.

For foreign brands like Skechers, there are opportunities to collaborate with Chinese partners to jointly develop cutting-edge technologies, leverage China's vast market to promote innovative products and services, and establish joint ventures for mutual growth. Of course, challenges exist. Foreign brands must navigate regulatory environments to ensure compliance with local laws and regulations while competing with increasingly mature domestic competitors. Moreover, improving market access and the implementation and enforcement of intellectual property protection are ongoing areas for enhancement. Successfully leveraging these opportunities depends on relationships with Chinese partners, technological differentiation and a deep understanding of local market dynamics.

CHUNG: New quality productive forces represent high technology, efficiency and quality. China's cultivation and development of new quality productive forces will promote rapid development in the field of scientific and technological innovation, especially in areas such as new energy, new materials and intelligent manufacturing. This will further unleash market potential and provide a broad platform for the development of foreign-funded enterprises. We are optimistic about the prospects of new quality productive forces and will actively integrate into the process of cultivating and developing these forces.

 

Q4 While China is expanding opening-up, some are concerned that geopolitical tensions, rising protectionism and global supply chain adjustments may weaken China's attractiveness to foreign companies. What's your take? How important will China be for your global business in the coming decade? What more opening-up measures can China take to offset the impact of the complex external environment?

MADARANG: Goodyear remains committed to the Chinese market, viewing it crucial for its global business strategy. China's new reform initiatives, focused on expanding opening-up policies and fostering industrial upgrades and technological innovation, align well with Goodyear's strategic objectives. We see substantial opportunities in China's ongoing reform and opening-up initiatives and remain dedicated to deepening our presence and investment in China and the broader Asia-Pacific region. Benefiting from the Regional Comprehensive Economic Partnership, we also ship tires manufactured in China to Japan and a number of Southeast Asian countries.

LOH: As the world's largest elevator market, China provides tremendous opportunities for Otis to continue supporting customers and passengers with quality elevator solutions and services. The growth of the Belt and Road Initiative also provides opportunities for Otis to extend the partnership mileage. For example, China's nonfinancial outbound direct investment in countries and regions participating in the BRI surged 9.2 percent year-on-year to $15.46 billion in the first half. In terms of infrastructure construction and improved transportation connectivity, Otis has been participating in the BRI and facilitated many projects in countries and regions involved in the initiative, including the Mecca Metro in Saudi Arabia, Abu Dhabi International Airport in the UAE and Egypt's Cairo Metro.

TAN: Geopolitical tensions, rising protectionism and global supply chain adjustments indeed pose challenges. These factors can potentially impact China's attractiveness to foreign companies by introducing uncertainties in trade policies, market access and operating environments. However, despite these challenges, China remains a crucial market for global brands. Its vast consumer base, strategic importance in global supply chains and ongoing commitment to reform and innovation create significant opportunities. With reforms and supportive policies, China is capable of reinforcing its position as a leading destination for foreign investment and business opportunities. The Chinese market is Skechers' largest market outside of the United States, making it crucially important for the brand.

CHUNG: Changes in the global market have had some impact on the Chinese market indeed, but with the continuous improvement of the business environment and the increasing market opportunities, Nippon Paint China firmly believes that the Chinese market remains an important development base for foreign-funded enterprises.

In 2023 fiscal year alone, the Chinese market contributed more than one-third of Nipsea Group's profits. China's vast consumer base and strong consumption potential play an irreplaceable role in the growth of Nipsea's overseas business. In the future, the core position of the Chinese market in Nipsea's global layout will remain unchanged.

 

Q5 The plenary session has stressed that reform tasks laid out at the meeting shall be completed by the time the People's Republic of China celebrates its 80th anniversary in 2029. How do you expect the new reform and opening-up measures to transform the Chinese economy in the coming five years? What strategies will your company adopt to align with the expected transformation? Looking ahead, in the second half of 2024, what are your expectations for the Chinese economy? How do you think your company will fare in this evolving landscape?

MADARANG: The plenum's reform measures are expected to significantly transform China's economy by 2029, with accelerated technological advancement, a more balanced economy driven by domestic consumption and an improved business environment. At Goodyear, our vision is to be recognized as the best mobility enabler in the luxury, SUV and EV segments across the Asia-Pacific region by 2028. To reach our goals, we will deepen our understanding of Chinese customers and consumers. Our two development centers in China will enable us to increase our responsiveness to local customer needs. Thanks to the great support from local governments where Goodyear operates, we are well-positioned to capitalize on the growth in the auto industry and our commitment to sustainability.

LOH: Otis looks forward to embracing new opportunities in the more open Chinese market. Recently, the government has launched policies to encourage and support the implementation of equipment renewal and urbanization across the country. There are imminent needs to accelerate the renewal of equipment in municipal infrastructure and add elevators to existing buildings. We are confident in Otis' growth in the Chinese market. With leading innovation, localized innovation, manufacturing and service capabilities, Otis is committed to contributing to China's modernization and high-quality development.

TAN: The new reform and opening-up measures outlined during the plenum are poised to significantly transform the Chinese economy over the next five years. By emphasizing technological innovation, market liberalization and sustainability, these measures aim to propel China toward higher-quality growth and greater resilience in the global economy. We anticipate more opportunities in sectors prioritized for reform, such as advanced manufacturing, digital economy and green technologies.

CHUNG: The Chinese market will be more open, innovative technologies will continue to emerge, regional development will be more balanced and the achievements of ecological conservation will be prominent. China's economy will be more vigorous and achieve high-quality development.

China's economy is at a critical juncture, transitioning from high-speed development to high-quality development. From the perspective of the consumer market, China's economic development is stable and improving, with market demand continuously evolving and rising. This provides more space for foreign-funded enterprises to explore innovation and business development. We remain optimistic about China's development, believing that investing in China is investing in the future.

 

Nat Madarang President of Goodyear Asia Pacific

 

 

Sally Loh Executive Officer of Otis Worldwide Corp and President of Otis China

 

 

Willie Tan CEO of Skechers China, South Korea and Southeast Asia

 

 

Eric Chung CEO of Nippon Paint China

 

 

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