(January 15, 2015)
Ladies and Gentlemen,
I am delighted to join you at this wonderful luncheon at the very beginning of the New Year. As the US economy has been doing very well over the past three quarters and the stock market has posted the sixth straight year of gains, I assume all of you had a prosperous year of 2014 and I wish you an even better year ahead.
I want to thank Mr. Hodges and the Northwest Indiana World Trade Alliance for organizing this event, which gave me a good excuse for having one day off from office so as to breathe some fresh air in northwest Indiana.
As Mr. Hodges told me, you are interested in doing business in China and the political climate for companies operating in China. If I got it correctly, the biggest question in your mind would be whether you could still make money in China.
Compared with ten or even five years ago, many foreign investors do find that it is no longer as easy as before to make a profit in China. But still the majority of foreign companies in China are making money and some of them are even making big money.
According to a report by US Chamber of Commerce in Shanghai, 74% of US companies in China who were surveyed gained profits in 2013. Another report by the US-China Business Council this year showed that nearly 50% of survey respondents claimed double-digit revenue expansion in China and 96% of the US enterprises surveyed still regarded China as one of the five markets for global strategic investment planning.
Major US automakers can tell us wonderful stories of successful investment in China by individual American companies.
Since 2010, China has overtaken the US as General Motor's largest national market. In 2013, GM delivered 3.2 million vehicles in China, accounting for about 35% of the company's global sales. GM has announced new massive investment of around $12 billion in China from 2014 to 2017.
Ford China sold almost one million vehicles in China in 2013, a 49% increase over the previous year. And Ford is spending 5 billion US dollars to build five new plants in China that will more than double its Chinese production capacity to 1.7 million vehicles by 2015.
In my opinion, China is still a promising land for foreign investors, and it's never too late to invest in China. I hold this belief, first of all, because China's economy enjoys bright prospects despite temporary downward pressure.
It's true that China's economy has been slowing down from an almost two-digital annual growth to around 7.5% now. Such a slowdown has been gradual and manageable. It's neither a hard brake, nor a hard landing. It's more like slightly releasing the accelerator to bring the speed down after your vehicle has traveled above the speed limit for a long time.
The slowdown is manageable, because, to a great extent, it was the result of the deliberate policy choice by the Chinese government, who now focuses more on improving the quality of the economy rather than simply seeking high growth speed. The slowdown is manageable, also because China has enough fiscal, monetary and other tools to stimulate the economy when necessary.
The goal of the Chinese government is to keep China's economic growth rate within a proper range. The upper limit is to prevent inflation running high while the lower limit is to ensure steady growth and employment. That means, China doesn't want its economy to grow too fast or too slow. Over the last couple of years, China's annual growth rate has been kept around 7.5%. This kind of growth speed is within the proper range, which the Chinese government is comfortable with.
What I want to emphasize is that, the slowdown in the speed of growth doesn't present us the whole picture of China's economy. The more fundamental feature of China's current economy is the structural changes taking place as a result of the ambitious program of deepening reform in a comprehensive way adopted by the Chinese government since the end of 2013.
The key purpose of the economic reform is to rationalize the relationship between the government and the market so that the market will play the decisive role in the economy and the government plays its functions better.
Reforms have been and will continue to be carried out in the areas of transforming government functions as well as the fiscal, financial, tax, income distribution systems and management model of investment. The success of those reforms will certainly strengthen the health, resilience and sustainability of the Chinese economy. And the Chinese government is determined to implement all the reform measures and achieve the desired results as scheduled.
Now it's time to look at the Chinese economy from a new perspective, since China's economy has entered a period of "New Normal" as recently officially announced by the Chinese government.
The term of "New Normal" is not only a description of the current economic status in China, but also a reaffirmation of the Chinese government's commitment to improving the quality and efficiency of China's growth model and promoting an economic growth driven by new industries and technology innovation. Such a "New Normal" brings us new hope for the future healthy development of China's economy.
In the foreseeable future, China will continue to be the second largest market in the world, only after the US. It will be a market with enormous potential. It will be a market boasting the largest number of consumers who are becoming richer year by year. Most importantly, it will be a market more open to foreign investors and tradesmen.
The Chinese government is currently thinking of reforming the model of managing foreign investment with the goal of eventually giving foreign investors pre-establishment national treatment. China is undertaking to open more economic sectors to foreign investors, carry out the mode of negative lists, streamline approval items and optimize approval procedures to make it easier for foreign businesses to invest in China.
In particular, China will likely relax market access for foreign investment in the service areas such as finance, education, culture and medical care. Many new practices in this regard are being tested in the Shanghai Pilot Free Trade Zone established in September, 2013, which will in the end be duplicated and promoted in other parts of China.
China is a firm supporter of economic globalization. It will certainly further open itself to the outside world. There is no doubt that companies in the US and other countries will find many new emerging opportunities for investment in China.
As China is becoming more open, the business environment in China will also improve. Last November, the Fourth Plenary Session of the 18th Communist Party of China Central Committee made a decision of advancing the rule of law in China. The strengthening of rule of law in China will provide more favorable legal environment for all commercial entities, either domestic or foreign.
As a matter of fact, over the recent years, China has already taken a series of actions in creating market environment for fair competition and better protecting the legitimate rights and interests of consumers. China has strengthened anti-monopoly law enforcement and stepped up its fight against forged and fake commodities, infringement upon intellectual property rights, theft of trade secrets and other illegal acts.
Here I wish to emphasize that China's anti-monopoly law enforcement was not targeting any particular market entities or foreign firms. Enterprises which have been subject to the probes involve domestic and foreign firms, both private and state-owned companies. It is simply misleading for the western media to characterize China's anti-monopoly actions as an attempt to weaken the competitiveness of foreign companies against Chinese domestic enterprises.
China knows very well the importance of foreign investment to its national development and its policy of welcoming foreign investment has not changed at all.
I encourage you to make an investment in China. However, not everyone investing in China will make money. In fact, no matter which country you invest in, there will always be risks.
If you want to invest or do business in China, you should, first of all, make an assessment on whether you have the capital and technical advantages in the area that you will invest and whether your product or service can meet the market demands there. You have to be prepared for the possible fierce competition in the Chinese market.
Second, you should make yourself familiar with the relevant laws and regulations in China. As China is in the process of deepening reforms, government policies or regulations in certain areas may change quickly. You have to be sensitive to those changes and readjust your business strategy timely.
Last but not least, it's always critical to find a good local partner. Generally speaking, most Chinese entrepreneurs are honest and reliable, but there are always bad apples whom you should be careful of. If you need any assistance from our Consulate in locating a business partner in China, you are welcome to approach us.
In closing, I wish to point out that as China and the US work together towards the goal of building a new type of major-country relationship featuring "no conflict, no confrontation", "mutual respect" and "win-win cooperation". China-US economic ties will continue to flourish. I hope that you will seize the new opportunities emerging from China as well as from the further development of the China-US relations and wish you successes in your business engagement with China.