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BRI Investment

Large foreign-invested projects swarm into China, and why?

January 15, 2020


Abstract : Recently, the news that Made-in-China Tesla vehicles are delivered to the public has grabbed the headlines.

Recently, the news that Made-in-China Tesla vehicles are delivered to the public has grabbed the headlines. The gigafactory of Tesla in Shanghai, with an investment of about 50 billion yuan, breaking ground one year ago, has realized mass production and car delivery. The whole process only takes one year, which is a witness of "China speed".

Tesla is not alone. In the first 11 months of last year, 722 large foreign-funded projects worth more than 100 million U.S. dollars were launched in China, up 15.5 percent. Insiders pointed out that these foreign-funded projects are not only large in scale, but also of high quality, and in the future China will embrace more such projects.

-- Large scale and higher level

"The Verbund base in Zhanjiang is the BASF's largest-ever investment project in China. Upon completion, it will be the company's third largest production base worldwide, following Ludwigshafen in Germany and Antwerp in Belgium," said Dr. Martin Brudermueller, chairman of the Board of Executive Directors of BASF SE.

On November 23, 2019, German chemical giant BASF officially commenced the construction of the integrated base on Donghai Island in Zhanjiang City, Guangdong Province. As the first wholly foreign-funded integrated petrochemical project in China, the Verbund project, with a planned area of about 9 square kilometers and an investment estimated to reach up to 10 billion U.S. dollars, is the world's first integrated production base adopting latest intelligent technologies. The first-stage units are expected to come on stream in 2022 and the entire base is estimated to be completed in 2030.

The number of foreign-funded megaprojects keeps growing across China, Siemens Healthineers invested 30 billion yuan to build a new laboratory diagnostics plant, INVISTA launched the adiponitrile facility project with an investment of over 1 billion U.S. dollars...More and more foreign companies choose to invest large projects in China.

"It is becoming a trend that large foreign-funded projects quicken their step to flock into China, and these projects are not only large in scale, but also high-tech and high value-added. This is in line with China's efforts to promote high-quality economic development," said Zhang Jianping, deputy director of Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce and director of the Research Center for Regional Economic Cooperation of the Institute of International Trade and Economic Cooperation.

-- Not only current opportunities but also future prospects

Why China? Foreign companies have given their answers.

Dr. Martin Brudermueller said by 2030, China will account for nearly 50 percent of global chemical production, Guangdong is an important market where innovative chemical products enjoy growth, and Zhanjiang, with advantageous ports, is striving to build high-speed rail and airport transportation networks. All these will benefit BASF.

In September 2019, after several rounds of tough negotiations, BBS Automation, a German automation solution provider, signed a cooperation agreement with Kunshan Development Zone. Under the tie-up, BBS Automation will set up an intelligent manufacturing design, R&D and system integration center and a headquarters controlled by Chinese investment, in Kunshan, east China's Jiangsu Province, with total investment reaching up to 300 million U.S. dollars. Josef Wildgruber, founder and CEO of BBS Automation said:" What drives us to choose China as the destination is the country's industry accumulation, future plan and great passion. We not only see the opportunities at present but also in the future."

It is not only the enormous market and great potential that attract foreign-invested megaprojects to China, but also the favorable business environment.

Elon Musk, CEO of Tesla, was very excited when the first Model 3 cars are delivered to consumer in Shanghai, saying that it is the good business environment that enables the smooth construction of the factory and the fast delivery of cars. From procedure optimization to tax reduction and exemption, from project subsidies to shortened approval times, from tracking services to financing support... Tesla's plant in Shanghai fully experienced the country's continuously optimized business environment and investment facilitation. These build up Tesla's confidence to seek further development in China. "Tesla will continue to make investment in China, by producing the Model 3, the Model Y and more new models, so as to develop and manufacture cars that truly belong to Chinese consumers," Mr. Musk said.

-- More such projects

What are the prospects for foreign-invested megaprojects settling in China? Meng Wei, deputy director of the Policy Research Center under the National Development and Reform Commission (NDRC) said:" We believe that in the coming period, other large foreign-invested projects including new energy, new petrochemical and electronic information will also be launched in China."

What is the foundation of this judgement? Martin Jacques, senior fellow of Cambridge University, reckoned that China has huge market space, vast development potential and strong innovation vitality. Most importantly, China is determined to deepen reform and open wider to the outside world. "Seriously, if you're a multinational, how can you not come to China?"

In Zhang's opinion, as the world's manufacturing center, China has a complete industrial chain, with the added value of manufacturing accounting for about 30 percent of the global share. The agglomeration effect and scale effect are strong, and the country is also moving towards the medium-high end chain, which is strong magnet for foreign investment. "China still enjoy great advantages in advanced manufacturing, even though some low-value-added and labor-intensive industries are being transferred to Southeast and South Asia."

(Edited by Bao Nuomin, [email protected])

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