COVID-19 Spurs Foreign Companies to Accelerate China Investment Ambitions
The spread of the COVID-19 pandemic may be having the unexpected effect of spurring foreign companies to accelerate their plans to expand into the Chinese market.
The COVID-19 pandemic has placed a heavy strain on China’s diplomatic and trade relations with number of major economies – in particular the United States and other Anglosphere nations such as the United Kingdom and Australia.
These heightened tensions have led to both the mooting and implementation of measures to impede trade and investment with China, and even to increasingly strident calls for economic decoupling.
The Trump administration has already placed curbs on sales of US goods to tech giant Huawei, while concerns over a buying spree by Chinese investors prompted Australia’s foreign investment regulator to implement heightened scrutiny of prospective deals.
Despite these moves, observers on the ground say many foreign companies are instead accelerating ties with China, which has thus far effectively contained the spread of the Novel Coronavirus while other major economies still struggle to check its progress.
Jons Slemmer, the Chengdu-based founder of WAYA Global and host of the China Business Cast, said to China Banking News in June that business has already picked up for his consultancy business.
“We are a digital agency that helps clients from all over the world to expand into China, and we’re very busy,” said Slemmer.
“A lot of new clients are seeing this as an opportunity to evaluate their business and make the move into China, now that things are not very rosy outside of China.”
“They are seeing their home markets as being threatened or unstable, and are looking for other markets for the long-term future. COVID-19 is an extra impulse to diversify and get additional revenue streams going forward.”
A recent report from Rhodium found that foreign investment in China had surged in the wake of further opening of the domestic economy by Beijing.
“Over the past 18 months, we have recorded levels of foreign M&A into China that were not seen in the previous decade,” said the online report by Thilo Hanemann and Daniel H. Rosen.
“Most of that activity has been driven by American and European firms taking advantage of looser foreign ownership limits or betting on Chinese consumer demand,”
Slemmer said that foreign companies can expect to reap immense rewards from long-term investment in the Chinese market, given that it retains immense growth potential over the next several decades.
“The domestic market is going to be growing exponentially – the amount of people in lower-tier cities is 400 to 500 million, and they’re all going through the same rapid development phase that Shanghai and Shenzhen did two decades ago,” said Slemmer.
“When that happens over the next ten to twenty years, there’s going to be a massive economic force, as five hundred million people are taken out of poverty and have the disposable income to spend on pleasure and amusement.”