Foreign capital plays a key role in modernization

Editor's note: The Qiushi Journal spoke to Sang Baichuan, a professor at the University of International Business and Economics, on the importance of foreign investment in China. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

Multinational corporations are key drivers of economic globalization and play a crucial role in promoting global economic growth and fostering trade and economic cooperation.

By encouraging foreign enterprises to participate in upstream and downstream collaboration within supply chains, China can deepen its integration into the global industrial division of labor while enhancing the security and resilience of its industry and supply chains.

Foreign enterprises in China account for nearly 7 percent of national employment and approximately one-third of foreign trade. By attracting more foreign investment, China can introduce more competitive products and services to meet the growing demand for quality, personalized, and diverse consumption options, thereby creating substantial job opportunities and raising living standards.

Some recent narratives have exaggerated claims of "foreign capital withdrawal from China". At face value, these views stem from misunderstandings of China's economic transformation and the restructuring of global supply chains. However, their underlying intent is to undermine China's economic trajectory and erode market confidence. Evaluating the outcomes of foreign investment in China requires a comprehensive approach. A dialectical analysis across different dimensions is essential to fully understand foreign investment dynamics.

Despite the undeniable achievements of foreign investment in China, challenges persist. First, there is a gap between market access and post-entry operational barriers, as foreign enterprises continue to confront institutional obstacles "beyond the border" during their operations.

Second, the business environment for foreign companies needs to be improved. Issues such as intellectual property violations, treatment in government procurement and project bidding, and fair and equal participation in domestic markets need to be addressed.

Third, some local governments, relying excessively on aggressive competition or offering tax and fee concessions, have created inefficiencies in resource allocation. Moreover, foreign enterprises' R&D centers in China face challenges that hinder their innovation potential.

Local governments should focus on continuously optimizing the business environment. This includes improving communication mechanisms with foreign enterprises and creating diversified application scenarios that provide a supportive market and policy environment for technological innovation, product refinement and experimentation with business models.

Strengthening the security and efficiency of industry and supply chains is also crucial. Encouraging collaboration between domestic and foreign enterprises and supporting foreign companies to deeply integrate into the local industrial ecosystem will facilitate their coordinated development and help them establish a strong presence in China across the entire chain of research, production and sales.

For many foreign enterprises, investing in China is synonymous with investing in the future.