Thriving Real Economy Thrills Foreign Companies

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   The world-known agricultural ma- chine manufacturer John Deere is diligently working on an ambitious plan in China: in the past 15 months, this company announced the plan of building three new plants in Heilongjiang and Tianjin. Recently, it decided to establish the production line of its knockout product cotton harvester in China.
  Luke Gakstatter, president of John Deere China, said that the Chinese government attached great importance to the modern agriculture that gave related foreign enterprises good development environment. But he stressed the Chinese market is undergoing fast development and changes featured with furious competition between Chinese and foreign companies.“Any company should have fast planning and adjustment if it wants to have a foothold in this country.”
  The Chinese economy is indeed in the period of profound and important transformation, just like what Gakstatter is experiencing.
  According to Zhang Monan, deputy fellow of the Economic Forecast Department at the National Information Center, the pattern that China got high capital return and fast economic growth through exports realized by low land, capital and labor cost is undergoing changes due to the long-term depression of global demand, as well as the income distribution reform, resource allocation and environment cost increase in China from the breakout of financial crisis in 2008.
  In truth, the change is also reflected in the FDI of foreign companies in China. In 2011, the investment recruited by China hit the historical high to 116.011 billion U.S. dollars. But the 9.72% growth is 7 percent lower than 2010.
  The analysts thought that the decreased growth rate was caused by the developed economies’ encouraging manufacturing enterprises to“return home”, the increasing cost in China, as well as Chinese government’s attaching importance to optimizing foreign capital structure and improving foreign capital quality.
  The new Work Report of the State Council of China published in early March highlighted the necessity of increasing domestic demand while stabilizing foreign demand, improving Real Economy while keeping the stable economic operation. The Work Report also stressed that increasing domestic demand was the basic foothold for the fast and stable development of China’s economy.
  He Shushan, director of the Tianjin Economic and Technological Development Area, said that the increasing labor cost and some other factors indeed had influences on foreign investment, but the need of releasing domestic demand, especially the consumption, still makes China an appealing market.
  In 2011, the urbanization rate of China exceeded 50% for the first time. It is generally believed in the market that the acceleration of industrialization, urbanization and agricultural modernization will unleash the great potential hidden beneath the consumption structure reform of China.
  The demand is not exclusive for the consumption, as Zhang Monan stressed. The traditional industries and technological upgrade also contain wonderful investment opportunities. In her opinion, given the long-term increasing trend of the production element prices, the inflow of capital into the low-end manufacturing will be slowed while boosting the Real Economy. The promotion of industrial upgrade just opened the space for foreign companies of advanced manufacturing, service supply and hi-tech industries, allowing them to share the benefits from China’s industrial upgrade.
  “The strategic emerging industry is the sally port for the economic transformation of China,” said Deng Zhonghan, commissioner of the National People’s Congress and board chairman of Vimicro Corporation. Both the foreign and domestic enterprises have the opportunity to share the benefits from the new generation of information technology, highend device manufacturing, energy saving, environment protection and biomedicine.
  The Catalogue of Industries for Guiding Foreign Investment (2011 Version) was officially implemented on January 30, in which the new products and technologies of textile, chemical industry and machinery, were included, along with the recycling of used electric products, new-energy autos and Internet devices based on IPv6. Meanwhile, the foreign investors are encouraged to put their money into the western and central parts of China.
  Shen Danyang, spokesman for the Ministry of Commerce, said that the Catalogue did not only show the goal of optimizing foreign capital structure, but also revealed the new opportunities of foreign investors in China.
  In truth, the amount of utilized foreign capital in the service of China reached 55.243 billion U.S. dollars in 2011, up 20.54% from 2010. The proportion was bigger than the manufacturing, which was the first time in China.
  He Shushan said that the Tianjin Economic and Technological Development Area utilized 4.3 billion U.S. dollars in 2011 with a 20% year-on-year increase. The investment was mainly put into the fields of information technology, biomedicine, new materials and high-end manufacturing.
  The new projects established in this area included the Product Test & Examination Center of John Deere, whose area doubled in the past two years. John Deere set up this center to make research and development exclusively for the Chinese market.
  Gakstatter said that he was quite bullish on John Deere’s development in China and thus made vast and continuous investment in talents, management system and construction of new plants.
  The Development Plan of National Modern Agriculture (2011-2015) issued by the Chinese revealed the goal that the mechanization level of agriculture in China will be increased from today’s 52.3% to 60% by 2015.
  “If we can join in this campaign, we can play an active role,” Gakstatter said. “We are always bullish on this market.”
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