Multinationals Fight for Chinese Markets

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Last updated at: (Beijing Time) Thursday, October 03, 2002

Multinationals Fight for Chinese Markets

More and more market freedom and improving investment environment are enticing multinationals into China's lucrative markets. The country's WTO accession makes business prospects even brighter for multinationals, most of whom are eager to have a finger in the pie.

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More and more market freedom and improving investment environment are enticing multinationals into China's lucrative markets.

The country's WTO accession early this year makes business prospects even brighter for multinationals, most of whom are eager to have a finger in the pie.

"Most are big companies coming to investigate and invest," Zhang Ying, secretary of the government office of Panyu City, south China's Guangdong Province, said, ruffling statistics sheets.

The city, near the provincial capital of Guangzhou, has attracted General Motors, Exxon Mobil, Siemens, Panasonic and Hitachi.

Over 400 companies of the world's top 500 have invested in China, according to statistics released by the Ministry of Foreign Trade and Economic Cooperation. In the first seven months this year, the number of approved overseas-funded enterprises hit 18,526, up 31.8 percent from the same period last year, involving 54.35 billion US dollars in contracted capital and 29.54 billion US dollars in actual use, up 31.8 percent and 22 percent respectively, according to the Ministry of Foreign Trade and Economic Cooperation.

In the first half of this year foreign business delegations came almost every day to Huzhou, a city in east China's Zhejiang Province, for investment tours and negotiations, said Yang Renzheng, a senior official of the city. Of the city's approved investment deals in the first half, programs involving 10 million US dollars or more are nearly five times that of the same period last year.

An American company entered a joint venture with a local private company to make small helicopters. "Work efficiency here is high. We took only half a year to produce the sample and the test fly is successful," Qiu Zirong, president of the company, said.

In Suzhou of Jiangsu Province, which is famous for its garden heritage, 84 companies out of the top 500 have financed 188 programs. The city has so far made use of 23.3 billion US dollars.

"China has a population of 1.3 billion, and so it is the primary market for most multinationals like Motorola," Christopher Galvin, chairman and chief executive officer of Motorola, said.

Over the past few years, multinationals have been investing in China's rising industries, such as automobiles, machinery, electronics, pharmaceuticals and chemicals.

Investors should have a long-term strategy for investing China, said a senior Japanese manager of Guangzhou Honda Motor Company, a Sino-Japanese joint venture making Honda sedans. Foreign capital even goes to sectors like urban water supply, as seen in increasingly fierce competition between the world's three leading companies in water and waste services: Thames Water International of Britain, Vivendi Environment and Suez Lyon Water Group, both of France.

Suez Lyon was the earliest foreign player on China's water supply market, and it has taken part in water plant constructions in around 100 cities. Vivendi has done well too since moving into China four years ago. Both Suez and Vivendi have invested over 1 billion US dollars in China.

More and more foreign companies now prefer to buy shares in Chinese companies rather than to open new operations by themselves in China in order to minimize costs and expand more rapidly with the help of established sales networks.

Last October, Alcatel bought a 51 percent controlling stake in Shanghai Bell Company. Alcatel has pledged to build Shanghai Bell Alcatel into its Asia business center and its main world research and development center.

Other multinationals like Emerson Electric and Shell Oil have also entered the Chinese market through shareholding.

Moreover, China clearly commits itself in its Tenth Five-Year Plan to encourage multinationals to participate in reforms of state-owned enterprises.

Shenzhen City, in south China's Guangdong Province, recently invited bidding for state-held shares of its five state companies, which was welcomed by big foreign companies. To date there are 13 multinationals registered to buy Shenzhen Energy Group with total assets of 13 billion yuan (1.57 billion US dollars).

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