Why foreign companies are confident in China's economy despite the epidemic
An employee wearing a face mask works on a production line manufacturing socks for export at a factory in Deqing County, Huzhou City, Zhejiang Province, China. /Reuters

An employee wearing a face mask works on a production line manufacturing socks for export at a factory in Deqing County, Huzhou City, Zhejiang Province, China. /Reuters

Editor's Note: The following article is taken from the Chinese-language opinion column "The Real Point."

China's commerce ministry said on Friday that 32 South Korean-funded auto parts companies in the eastern province of Shandong had fully resumed work before last Saturday. It has greatly relieved the pressure on international automakers, some of whom had to suspend production as the COVID-19 outbreak hit parts supply.

Other foreign-funded firms in China have also started resuming production while ensuring safety. The Tesla Gigafactory in Shanghai was among the first to do so more than ten days ago. Over 80 percent of major foreign firms in such places as Shanghai municipality, and Shandong and Hunan provinces have resumed work. Foreign-funded firms are expected to resume production in most places by the end of next week.

A consensus shared by the majority of the foreign companies in China is that the impact of the epidemic on the Chinese economy is temporary, as the fundamentals sustaining long-term economic growth have not changed. American automaker Ford Motors said China's huge market demand is still there, and the company is confident in the prospects of China's future economic growth.

China has remained the world's second largest destination for foreign capital inflow since 2017. In January this year, the actual use of foreign capital in the country stood above 87 billion yuan (12.7 billion U.S. dollars), an increase of 4 percent over the figure recorded a year ago, basically continuing with the steady growth momentum of last year.

A major reason why China is a big market for foreign investment is that it provides an unbeatable comprehensive supply chain that helps foreign firms effectively reduce their costs. A Goldman Sachs research report issued in 2018 said that if Apple moved its production and assembly back to the States, the company's production costs would rise by 37 percent. Those who try to play up the idea of foreign firms moving out of China amid the epidemic have little sense of how the economy works.

To help foreign firms resume work at an early date, the Chinese government issued a series of supportive measures. In Shanghai, local authorities have included over 140 foreign companies in a list enjoying preferential financing policies and tax/fee reduction policies. A Danish-funded marine boiler producer in Qingdao, Shandong Province, has been busy delivering orders from Japan and South Korea. It said that it couldn’t have resumed production so early without the help of the local authorities.

In the meantime, foreign firms in China are also providing help to the local fight against the epidemic. As of Friday last week, the donations by foreign-funded enterprises exceeded 1.76 billion yuan (255 million U.S. dollars), including cash, daily necessities and professional medical supplies. In addition to cash, they also donated a large amount of basic daily necessities and professional medical supplies. As American Chamber of Commerce China Chairman Gregory Gilligan said, “We want to prove with action that we are also part of Chinese society.” He also noted that from the feedback from executives of member companies of the chamber, American firms still have confidence in the Chinese economy and the U.S. business community is willing to strengthen cooperation with China.

As China makes every effort to restart its economic engine, foreign businesses in the country have good reason to believe in China's economic outlook.