"Foreign investment in Guangdong mainly falls into three types: foreign 
trade-oriented, manufacturing-oriented, and service-oriented. Service-oriented 
foreign-funded enterprises have shown a rapidly increasing trend in recent 
years," Joanne Wang, Guangdong Markets Leader of PwC China, told GDToday and 
Lianhe Zaobao at a joint interview on the high-quality development in 
Guangdong, the province perceived as the economic engine of China.

She took Shenzhen as an example, saying that the city's actual use of foreign 
investment in the high-tech industry hit 4.5 billion USD in 2022, accounting 
for 41 percent of the city's total. The actual use of foreign investment in the 
high-tech service industry increased by 13 percent year-on-year, indicating a 
rise in the quantity and quality of foreign investment.

Manufacturing industry to see "qualitative breakthrough"

The Guangdong government vowed to boost high-quality development at a grand 
conference held on January 28, the first working day after the Chinese New Year 
holiday, which indicates a shift in focus from quantitative economic indicators 
to sustainable and environmentally-friendly growth.

The province emphasized the role of manufacturing industry in its new round of 
development, and highlighted its 8 industrial clusters with more than 
1-trillion output, including new-generation electronic information, green 
petrochemicals, intelligent home appliances, advanced materials, modern light 
industry and textiles, software and information services, modern agriculture 
and food, and automobiles. 

"Guangdong's OEM service took off 45 years ago and drove the province's foreign 
trade and overall development for years. Now that Guangdong's manufacturing 
industry has achieved leapfrog development, it needs a qualitative breakthrough 
to drive further growth," said Guo Wanda, Executive Vice President of China 
Development Institute (CDI).

Wang Jun, Former President of the Guangdong Academy of Social Sciences, 
analyzed that Guangdong is now driving the quality of its manufacturing 
industry through increasing the investment in basic research, saying, "It 
indicates that the province attaches great importance to original technological 
innovation."

According to the Department of Science and Technology of Guangdong Province, 
Guangdong's basic research funding accounts for 4.23 percent of the total 
research and experimental development (R&D) expenditure in 2018, which is 
relatively low nationwide. The number grew up to 5.87 percent in 2020 and 7.64 
percent in 2022, and is expected to reach 10 percent by 2025 and 13 percent by 
2030.

In addition, Wang believes that the electronic information industry which is a 
pillar industry of Guangdong, will provide the technologies and industrial 
facilities needed for smart manufacturing.

Position in global supply chain maintained with focus shifted

To draw in investment and boost the economy, emphasis is also placed on efforts 
to improve the business environment for foreign companies. Guangdong Governor 
Wang Weizhong said the province would implement the national treatment of 
foreign-funded enterprises and expand their market access.

Joanne Wang explained that policy transparency, government efficiency and tax 
costs are the three factors that foreign-funded enterprises are concerned with 
most when evaluating a business environment.

Klaus Zenkel, Vice President of the EU Chamber of Commerce in China and 
Chairman of the European Chamber South China Chapter, added that factors such 
as intellectual property rights protection, tax incentives as well as the 
supply of green energy are key to foreign companies when it comes to 
high-quality and sustainable development.

Guangdong is drafting an action plan to optimize the business environment, 
addressing issues such as the inadequate implementation of policy documents and 
prominent feedback from enterprises, according to Huang Huadong, Deputy 
Director-general of the Guangdong Development and Reform Commission.

Some foreign companies, including Toshiba and Samsung, have relocated their 
production lines from China to Vietnam, Thailand and other Southeast Asian 
countries over the past two years, sparking discussions about China's changing 
position in the global supply chain.

Zenkel considers it a China Plus One Strategy that has been adopted by most 
multinational companies, that is, setting up factories in both China and other 
countries, to ensure a more flexible and complete supply chain ecology. "Our 
Business Confidence Survey shows most companies would like to stay in China and 
have no plan to move away from the country," he said.

"China has maintained an important position in the global supply chain and 
served the global market for a long time with a complete range of industries, 
well-developed infrastructure and abundant industrial professionals. Southeast 
Asian countries lack these elements, as a result of which, the relocated 
manufacturers have not yet shown particularly good economic benefits," said 
Joanne Wang.

Based on the Government Work Report, Guangdong will adopt a new pattern of 
investment promotion in 2023 and attract domestic and foreign capital to the 
entire industrial chain. It will prioritize technological and manufacturing 
enterprises with strong competitiveness.

Wang Jun said that compared with the labor-intensive industries such as 
furniture, clothing, and textiles in the 1980s and 1990s, future competition 
and opportunities lie in high-tech manufacturing and services. Provinces and 
regions of China are now putting solid efforts into attracting foreign 
investment in these sectors.

Source GDToday

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   Caption: The GAC TOYOTA production line in Guangzhou, Guangdong, China