Opinion | How foreign firms can stay on their feet in China’s dynamic market

To advance China’s modernisation, its leaders adopted a resolution at the third plenum to “embrace broader horizons through further reforms and opening up”. This was not unexpected, given China’s urgent need for cutting-edge technology, skilled labour, foreign capital and managerial expertise.

But its economy, in particular the industrial sector, is grappling with deflationary pressure, as seen in key indicators such as the producer price index and the manufacturing purchasing managers’ index. This has raised concerns among foreign companies about their prospects in a declining macroeconomic environment.

Chinese leaders recognise that stabilising the economy is crucial to attracting foreign companies. Months before the third plenum, Beijing began rolling out a suite of monetary, fiscal and industrial policies, including cuts to the five-year loan prime rate and mortgage rates, as well as substantial subsidies for sectors promising “new quality productive forces”.

It has also tightened its political oversight over various industries while striving to mitigate corporate and local government debt by issuing “ultra-long-term special government bonds” and refinancing bonds. Although these initiatives can hardly resolve China’s fundamental economic problems, they signal to foreign businesses that a systemic crisis is unlikely for now and that there are new opportunities in industrial sectors.

China is emphasising the certainty of its economy opening up further to counteract the uncertainties of the domestic and external environment. That it is implementing 24 measures to stabilise foreign investment underscores this commitment.