American businesses still pour money into China

Contrary to Trump’s desire, American companies still invest in China, a market of more than 1.4 billion people.

According to the Ministry of Commerce of China, foreign direct investment (FDI) into this country in the first 9 months of this year increased by nearly 3% over the same period last year. The pace for 2018 is similar.

A gigafactory of electric carmaker Tesla Inc is seen in Shanghai, China October 18, 2019. REUTERS/Aly Song – RC18D1CDE3B0

“Multinational companies are now more likely to invest in China, because serving this market from abroad is risky, amid a series of trade barriers being erected and the suspension of The battle may be temporary, “explained David Dollar, senior analyst at the Brookings Institution.

About 75% of FDI into China currently goes to services, electricity, water and gas and other sectors to cater to the country’s market, Dollar said. The trade war only makes them more sure that there is a base in China.

This is in stark contrast to what Mr. Trump wants, that US companies must find other alternatives to China. “If you tell big US businesses: Officials say they have to leave the Chinese market, they will say No, because the reward is too big,” said Arthur Kroeber, research director at Gavekal said at an event in Hong Kong this month.

A lot of companies are placing big bets on Chinese consumers. Tesla wants to mass-produce it at its new factory in Shanghai. This is their first factory outside the US and has been lent up to US $ 521 million by Chinese banks.

LG Chem, the world’s largest lithium-ion battery maker last month, said it plans to invest about $ 430 million in its Chinese business. In June, it also partnered with Chinese automaker Geely Automobile Holdings to produce batteries for electric vehicles.

Even GE Renewable Energy, BASF and Walmart recently announced pouring billions of dollars into facilities in China. Such investments will help ease the impact of manufacturers leaving China because of U.S. taxes, helping Beijing reach its employment goals even in the context of the slowest economic growth of nearly 30. year.

AstraZeneca CEO Pascal Soriot said that whether there is a trade war or not, the attraction of 1.4 billion people is also undeniable. “We have to invest more in China,” he told the Import Expo in Shanghai this month.

Ker Gibbs, head of the American Chamber of Commerce in Shanghai, said US companies are still welcome in China. “At the local level, we even find them even more enthusiastic with foreign investment. They are very active in inviting us,” he said.