Page 32 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
1.2 The Impact of U.S. and Other Foreign
Companies on China
Introduction these impacts and ripple effects, foreign companies
help generate one-third of China’s GDP and over one-
China’s economic opening and reforms quarter of its employment. U.S. companies and their
have created the world’s most ripple effects through China’s economy contribute
dynamic economy. China has become the world’s second more than 180 times the value of the usual measure
largest economy and the world’s leading trading nation. of USFDI inflow, and 11 times the net profit of the U.S.
In the process, hundreds of millions of people have been firms, to China’s GDP each year. This means that the
raised from poverty and the nation as a whole is rapidly benefits to China are not only orders of magnitude
achieving the moderately prosperous status set as a larger the usual measure of foreign enterprise activities,
target by China’s President Xi Jinping. but are also far larger than the benefits obtained by the
foreign companies.
One of the key parts of China’s economic emergence
has been the contribution of foreign direct investment U.S. and other foreign companies also provide
(FDI) and foreign invested enterprises (FIEs) or foreign additional contributions that have not been quantified
affiliates (FAs). In May 2015, the Hinrich Foundation, a to date. These include the benefits to Chinese
Hong Kong-based foundation dedicated to furthering consumers and customers; the benefits generated
understanding of sustainable trade and investment, by the sourcing activities of foreign companies;
initiated a 16 month project to examine the impact of and a wide range of other benefits involving the
FDI and FIEs / FAs on China’s economy. The project was modernization and development of industries, support
undertaken by Enright, Scott & Associates (ESA), an of supplier and distribution networks, technology
Asia-based consultancy focused on economics, public development, business practices and management
policy, and business strategy. The results of the project training, sustainability practices, and corporate social
were published in Michael J. Enright, Developing China: responsibility (CSR) initiatives, and many others.
The Remarkable Impact of Foreign Direct Investment
(Routledge 2017). The Chinese edition, translated by the Understanding and communicating the full benefits
Chinese Academy of International Trade and Economic of the U.S. and other foreign company presence will be
Cooperation (CAITEC), was published in mid-2017. necessary to “make the case” for the value they bring to
The positive response to that project created interest China in the face of increasing skepticism. Unfortunately,
in a more detailed analyses focusing on the impact of these entities rarely have the full information at their
U.S. foreign investment and U.S. companies on China’s disposal. As a result, foreign representatives in China
economy. The results of that project were published in tend to fall back on legalistic statements concerning
The Impact of U.S. Foreign Investment and U.S. Companies treaties and obligations, or generalities about what is
on China’s Economy (Hinrich Foundation 2017). This “good for China” instead of specific analysis of how much
article summarizes the results of the projects. China has gained, and has to gain, from openness to U.S.
and other foreign companies.
The main conclusions are that U.S. and other foreign
companies have been major contributors to China’s The Current Situation
economy since China’s economic opening. While the
FDI flows into China have been significant, it turns out There are hundreds of thousands of foreign
that the operations of the foreign companies and their companies active in China. Many have done extremely
economic impact through supply chains, distribution well in China over the years. However, many also report
channels, and the consumer spending of employees difficulties in operating in China.
are far greater than most people imagine. Including
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1.2 The Impact of U.S. and Other Foreign
Companies on China
Introduction these impacts and ripple effects, foreign companies
help generate one-third of China’s GDP and over one-
China’s economic opening and reforms quarter of its employment. U.S. companies and their
have created the world’s most ripple effects through China’s economy contribute
dynamic economy. China has become the world’s second more than 180 times the value of the usual measure
largest economy and the world’s leading trading nation. of USFDI inflow, and 11 times the net profit of the U.S.
In the process, hundreds of millions of people have been firms, to China’s GDP each year. This means that the
raised from poverty and the nation as a whole is rapidly benefits to China are not only orders of magnitude
achieving the moderately prosperous status set as a larger the usual measure of foreign enterprise activities,
target by China’s President Xi Jinping. but are also far larger than the benefits obtained by the
foreign companies.
One of the key parts of China’s economic emergence
has been the contribution of foreign direct investment U.S. and other foreign companies also provide
(FDI) and foreign invested enterprises (FIEs) or foreign additional contributions that have not been quantified
affiliates (FAs). In May 2015, the Hinrich Foundation, a to date. These include the benefits to Chinese
Hong Kong-based foundation dedicated to furthering consumers and customers; the benefits generated
understanding of sustainable trade and investment, by the sourcing activities of foreign companies;
initiated a 16 month project to examine the impact of and a wide range of other benefits involving the
FDI and FIEs / FAs on China’s economy. The project was modernization and development of industries, support
undertaken by Enright, Scott & Associates (ESA), an of supplier and distribution networks, technology
Asia-based consultancy focused on economics, public development, business practices and management
policy, and business strategy. The results of the project training, sustainability practices, and corporate social
were published in Michael J. Enright, Developing China: responsibility (CSR) initiatives, and many others.
The Remarkable Impact of Foreign Direct Investment
(Routledge 2017). The Chinese edition, translated by the Understanding and communicating the full benefits
Chinese Academy of International Trade and Economic of the U.S. and other foreign company presence will be
Cooperation (CAITEC), was published in mid-2017. necessary to “make the case” for the value they bring to
The positive response to that project created interest China in the face of increasing skepticism. Unfortunately,
in a more detailed analyses focusing on the impact of these entities rarely have the full information at their
U.S. foreign investment and U.S. companies on China’s disposal. As a result, foreign representatives in China
economy. The results of that project were published in tend to fall back on legalistic statements concerning
The Impact of U.S. Foreign Investment and U.S. Companies treaties and obligations, or generalities about what is
on China’s Economy (Hinrich Foundation 2017). This “good for China” instead of specific analysis of how much
article summarizes the results of the projects. China has gained, and has to gain, from openness to U.S.
and other foreign companies.
The main conclusions are that U.S. and other foreign
companies have been major contributors to China’s The Current Situation
economy since China’s economic opening. While the
FDI flows into China have been significant, it turns out There are hundreds of thousands of foreign
that the operations of the foreign companies and their companies active in China. Many have done extremely
economic impact through supply chains, distribution well in China over the years. However, many also report
channels, and the consumer spending of employees difficulties in operating in China.
are far greater than most people imagine. Including
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