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Amanda Lee

Competition is heating up between local governments in China to lure foreign investment in advanced technology, amid growing pressure on the economy and competition with the United States.
In recent weeks, a number of local authorities have released investment plans worth billions of dollars and rolled out a host of incentives in a bid to steady growth.
Though many are seeking to upgrade technological capabilities, there is continued emphasis on infrastructure investment, with targets for fixed asset investment growth generally ranging between 6 to 10 per cent for the year.
Shanghai on Friday announced it had signed off on 53 foreign investment projects with an overall value of US$5.44 billion.
The investment growth targets shouldn’t be viewed too seriously
Larry Hu
Many of the new deals cover advanced tech, including a US$30 million investment from German optics and optoelectronics company Carl Zeiss AG. The firm will establish manufacturing facilities for optical systems, industrial measuring instruments and medical equipment in the city, the Shanghai government said.
Governments in Shenzhen and Quanzhou, meanwhile, have announced cash incentives for foreign investment projects.
Larry Hu, chief China economist at Macquarie Capital, said there was a “certain degree of uncertainty in the investment targets”.
“The investment growth targets shouldn’t be viewed too seriously because there may be changes with actual investment,” he said.
China’s gross domestic product (GDP) growth slowed in the fourth quarter of last year and faces a range of challenges, including sporadic coronavirus outbreaks weighing on consumption and a slowdown in the real estate sector.


Beijing’s stricter regulation of real estate developers is also hurting debt-laden local governments that relied on land sales and building projects for revenue.
According to JP Morgan, real estate investment directly contributed 14-15 per cent of GDP last year, including construction and residential property development, and around 25 per cent if taking into account upstream and downstream sectors.
Local governments are hoping to make up the shortfall in property investment with spending in manufacturing, especially advanced technology.
President Xi Jinping last year called for a greater level of technological independence to free China from US restrictions.
Shenzhen, China’s southern technology hub, said on Monday it would offer up to 100 million yuan (US$15.7 million) to any new foreign investment project worth US$50 million, although not in the real estate or finance sectors.


Luojiang district in Quanzhou, the largest metropolitan region in Fujian province, said on Saturday it would offer up to 10 million yuan to entities and individuals that brought tech investment to the area.
The incentive is aimed at Fortune 500 companies, global industry leaders and Taiwan’s top firms, the Luijiang government said.
Tang Fengchi, an analyst with Dayue Consulting, said local government officials often go after large companies and multinationals without examining whether their businesses were appropriate for regional development.
“Most governments in underdeveloped areas want to learn from the development experience of developed coastal areas and clone their successful models,” said Tang in an article published in The Economic Observer last month. “However, the results are not satisfactory, and the successful experience in developed regions is not that easy to replicate.”
6 controversial mega projects being discussed in China
Shenyang, the capital and largest city in the northeastern province of Liaoning, was forced to remove a statement on Monday in which it claimed it was preparing to become a production hub for electric vehicles, such as Tesla, after the US car maker denied it was setting up a factory there.
Many local governments in China build industrial estates in the hope of luring future investment, but the strategy can result in wasted resources, research company Zhongzhikebo said in a report last month.
“Attracting investment has always been a key task for local governments to develop the economy,” it said. “However, in the new era of China’s economy and high-quality development, it is becoming more and more difficult to attract investment.”
‘Pressure on’: what do local economic targets say about China’s outlook?
The report said the reshoring of manufacturing in the US and Europe amid the coronavirus pandemic, along with the cheaper labour and more favourable investment policies in Southeast Asia, mean some Chinese cities are losing their edge.
Even when a deal is signed, it does not guarantee it will go ahead due to changes in market dynamics, national policy and supplier costs, said Zhongzhikebo.
“At the same time, with the continuous reduction of large-scale infrastructure construction in recent years, the market demand for industrial products has been shrinking, which has also made it impossible for many projects to continue to be implemented,” the consultancy added.



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China’s local governments are hoping to make up a shortfall in property investment with foreign investment in areas like tech. Photo: Xinhua

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In recent weeks, a number of local governments have released investment plans worth billions of dollars to help steady economic growth
Many are hoping to make up a shortfall in property spending with investment in manufacturing, especially advanced technology



China’s local governments are pulling out all the stops to lure investment – especially in advanced technology – amid mounting economic challenges, including a slowdown in the property market.


China’s local governments, hit by property market slowdown, court foreign investment to steady growth

In recent weeks, a number of local governments have released investment plans worth billions of dollars to help steady economic growth Many are hoping to make up a shortfall in property spending with investment in manufacturing, especially advanced technology

In recent weeks, a number of local governments have released investment plans worth billions of dollars to help steady economic growth

Many are hoping to make up a shortfall in property spending with investment in manufacturing, especially advanced technology