The "Source" and "Flow" of Made in China

Foreign investment and the international market are important components of the "source" and "flow" of China's manufacturing industry development. Only by accurately analyzing the new changes in foreign investment and the international market can we adapt to changes with stability and seek progress while maintaining stability to expand new opportunities and spaces for high-quality development of the manufacturing industry.

Currently, there is a saying in society that foreign investment and the international market are not as important under the new situation. Scholars have raised different opinions on this, emphasizing that foreign enterprises are important participants in the development of China's foreign trade, and promoting the internationalization of supply chain layout is an inevitable process for China's manufacturing industry to further improve. We believe that since the reform and opening up, foreign investment has effectively promoted the rapid development and transformation of China's manufacturing industry, and the international market has become an important carrier of "Made in China". Foreign investment and the international market are important components of China's manufacturing source and flow, and have a unique driving effect on the high-quality development of the manufacturing industry.

Foreign investment is an important source of funding for China's manufacturing industry

The manufacturing industry is the largest industry in China that utilizes foreign investment. From 2005 to 2022, the average annual scale of foreign investment utilization was 41.98 billion US dollars, accounting for about 30% of the total, far exceeding other industries. In 2011, the actual utilization of foreign investment in the manufacturing industry reached its peak at 52.1 billion US dollars. Afterwards, it decreased year by year and dropped to $30.9 billion by 2020. In 2022, the actual use of foreign investment in the manufacturing industry rebounded significantly, increasing to 323.7 billion yuan, with a year-on-year growth rate of 46.1%, and the scale of investment reached a new high in nearly 10 years. In 2023, the actual use of foreign investment in the manufacturing industry was 317.9 billion yuan, a decrease of 1.8%, but the scale is still at a historical high.

From the perspective of regional structure, the utilization of foreign investment in China's manufacturing industry is mainly concentrated in the eastern region. In 2023, the top five provinces in China that actually utilize foreign investment are Jiangsu, Shanghai, Guangdong, Zhejiang, and Shandong. Among them, key cities such as Shanghai, Hangzhou, Ningbo, Wuxi, and Nanjing located in the Yangtze River Delta region have all achieved counter trend growth. A number of foreign-funded brands, such as Airbus, Bosch, SK Hynix, General Electric, Panasonic, etc., which are headquarters oriented, R&D oriented, and focus on high-end manufacturing, have settled in. Large scale projects such as BASF Zhanjiang Integration Project, Saudi Aramco and Rongsheng Petrochemical, and Shandong Yulong Island Project are also accelerating their landing.

From the perspective of industry structure, the utilization of foreign investment in the manufacturing industry is undergoing structural adjustment. In recent years, the scale of foreign investment utilization in high-tech industries and emerging fields has grown rapidly. In 2022, the actual use of foreign investment in high-tech industries increased by 28.3%, accounting for 36.1% of the national total, an increase of 7.1 percentage points from 2021. Among them, the actual use of foreign investment in electronic and communication equipment manufacturing grew the fastest, reaching 56.8%. In 2023, the actual use of foreign investment in high-tech manufacturing increased by 6.5%, while the manufacturing of medical equipment and instruments, as well as the manufacturing of electronic and communication equipment, increased by 32.1% and 12.2%, respectively.

As a major way of attracting foreign investment, foreign-funded enterprises have deeply integrated into the development process of China's manufacturing industry, playing an important role in promoting the enhancement of technology, management, brand and other elements of China's manufacturing industry. Meanwhile, the rapid development of China's manufacturing industry has also provided important channels for foreign-funded enterprises to increase their income. According to data from the State Administration of Taxation, in 2023, the sales revenue of the equipment manufacturing industry, which is a key focus of foreign investment, increased by 6.4%. Among them, the total sales revenue of industries related to electric passenger vehicles, lithium-ion batteries, and solar cells' new three types of products increased by 22.4%. In addition, as the pace of China's manufacturing industry transformation and upgrading accelerates, leading multinational companies represented by Tesla, JPMorgan Chase, Apple, Qualcomm, etc. will anchor high-tech and emerging fields and accelerate their deployment in China.

The international market is an important destination for "Made in China"

The significance of the international market for the development of China's manufacturing industry is reflected in two aspects. On the one hand, actively exploring the international market is the only way for China to transition from a trading power to a trading powerhouse. According to industry estimates, the output of China's manufacturing industry accounts for about 30% of the global market, but the domestic market demand accounts for 18%, and at least 12% of the output needs to be digested in the international market. According to data from the World Trade Organization, in the first three quarters of 2023, despite a weak recovery in the international market, China's total trade in goods and exports accounted for 12.3% and 14.2% of the global total, which remained unchanged from the same period last year, indicating a relatively stable survival relationship between China's manufacturing industry and the international market. On the other hand, actively engaging in overseas investment and promoting China's manufacturing industry to enter the international market is an inevitable choice for China to actively optimize its global supply chain layout. At present, the manufacturing industry has become the second largest industry in terms of overseas investment flow and the fourth largest industry in terms of stock in China, and its ability to allocate resources on a global scale is continuously strengthening.

From the perspective of foreign trade structure, the export commodity structure of manufacturing industry is gradually tilting towards high value-added products. In the past five years, the export scale and proportion of heavy industrial products such as vehicles and ships, chemical products, and metal products have significantly increased. In 2023, the export value of the above-mentioned major categories of goods increased by 212.5%, 119.5%, and 118.8% respectively compared to 2018. Among them, vehicles and ships have become the main driving force for China's export growth in recent years. International automotive giants such as Volkswagen, BMW, Honda, and Tesla have leveraged the unique advantages of China's industrial chain to accelerate their transformation towards new energy vehicles, driving the global automotive industry's green transformation process.

From the perspective of overseas investment structure, the scale of manufacturing investment by Chinese enterprises overseas has steadily increased, and the sub industry structure continues to optimize. According to data from the secondary sub industries of overseas investment in manufacturing, automobile manufacturing, computer and communication manufacturing, and metal products are the three industries with the highest overseas investment flow. In 2021, the investment scale reached 4.27 billion US dollars, 3.25 billion US dollars, and 2.39 billion US dollars, respectively.

Give full play to the positive role of foreign investment and the international market, and promote the high-quality development of China's manufacturing industry

For a long time, foreign investment and the international market have played a positive role in promoting the rapid development of China's manufacturing industry. It should be noted that China's industrial system is becoming increasingly perfect, and the domestic market is becoming increasingly large. The favorable conditions for efficient utilization of foreign investment and the international market are becoming more prominent. Practice has proven that foreign investment and the international market are important components of the "source" and "flow" of China's manufacturing industry development. Only by accurately analyzing the new changes in foreign investment and the international market can we adapt to changes with stability and seek progress while maintaining stability to expand new opportunities and spaces for high-quality development of the manufacturing industry.

The door for China's manufacturing industry to open up to the outside world will continue to widen.   The manufacturing industry entry in the current negative list of foreign investment access in the pilot free trade zone version has been completely cleared, and the national version of the negative list of foreign investment access will also completely cancel the restrictions on foreign investment access in the manufacturing industry. China's manufacturing industry is aligning with high standard international rules, transitioning from a commodity and factor flow oriented openness to an institutional oriented openness.

There is significant growth potential for China's manufacturing industry to utilize foreign investment. China's manufacturing industry is accelerating its transformation and upgrading from the low-end to the high-end of the global industrial chain. Whether it is project construction or production, there is an unparalleled astonishing speed in the world. Elon Musk, CEO of Tesla, was deeply impressed by Tesla's Shanghai super factory's historical record of similar projects landing in Shanghai and even across the country. China has an industrial system and a huge potential consumer market that other countries cannot match, and a comprehensive advantage characterized by quality and efficiency is being formed. With the continuous deepening of the digital and green transformation of China's industrial system, investment in high-tech and emerging fields of manufacturing is expected to maintain a development trend faster than overall investment.

Made in China is winning the international market with a brand new attitude. Taking Chinese automobile manufacturing as an example, in 2023, China's automobile export volume surpassed Japan and ranked first in the world, entering the core market of global electric vehicles with the best cost performance ratio of high quality and low price. In the field of batteries, a report from the Carnegie Foundation in the United States shows that China uses iron and phosphate to replace the metal nickel and cobalt required for lithium-ion batteries, making the raw materials easier to obtain and significantly reducing costs. Lithium iron phosphate batteries account for more than 60% of China's new energy vehicle market share. Meanwhile, China is actively developing sodium ion batteries, which are expected to reduce costs by half compared to lithium iron phosphate batteries. Harvard Business Review states that one of the key advantages of Chinese electric vehicles is their mastery of core technologies. Moody's believes that the speed of research and application of new technologies in China's electric vehicle industry is unparalleled. It can be foreseen that in the future international market, technology intensive and high value-added goods from China, such as new energy vehicles, will further replace traditional light industrial products and become the new dominant force in Chinese manufacturing.