Enemies but... US Companies Still Invest in China

Attractive Consumer Market of a Population Giant
Also a Means to Block China's Overseas Expansion

[Asia Economy Reporter Kwon Jae-hee] In front of the American fast-food chain Popeyes located in Shanghai, China, on the 15th. Although the opening time was 10 a.m., a crowd gathered from 4 a.m., creating a huge queue of people waiting. Popeyes plans to open 1,500 stores in China, starting with the Shanghai location.

Despite the US-China conflict entering an explosive phase, American companies' investment rush into China remains strong. Honeywell, a US company visited by President Donald Trump for an industrial inspection, held a launch ceremony for its Emerging Markets Regional Headquarters and Innovation Center in Wuhan, China, on the 19th. This marks a new entry of an American company into the origin city of the novel coronavirus (COVID-19). Chinese Premier Li Keqiang also sent a letter expressing his welcome for the investment.

Not only these companies but also Walmart, Tesla, and ExxonMobil have decided to proceed with their China operations as planned. Walmart recently announced it will continue with its plan to expand 500 new stores in China as scheduled. The company had announced last year its intention to significantly increase the number of stores in China, and despite the bilateral tensions, it decided to push forward. Costco also plans to open more than two additional stores in Shanghai Pudong and Suzhou, Jiangsu Province. Tesla has already started expanding its Shanghai factory. The reason American companies are proceeding with their China investments as originally planned is that China remains attractive as a consumer market. Xiao Lei, a famous Chinese economic columnist, explained, "Despite the US-China trade war, it shows that American companies find it difficult to abandon the Chinese market," adding, "Although China has passed its high-growth phase, its consumer power remains strong." There is also an interpretation that this is a measure to prevent China's overseas expansion. J?rg Wuttke, chairman of the China-European Union (EU) Chamber of Commerce, said, "If you are not active in the Chinese market, China will come into your backyard," adding, "Even if you fight, it is more advantageous to do so in the Chinese market."

The Wall Street Journal (WSJ) analyzed that unlike companies exposed to supply chain risks due to COVID-19 who are trying to reduce dependence on China, companies with local production systems are focusing more on 'localization' strategies to capture Chinese customers. Especially, after the US and China reached the Phase One trade agreement in January and announced the removal of discriminatory measures against foreign companies, corporate interest increased. Premier Li Keqiang emphasized in his letter to Honeywell, "We will create a market-oriented, law-based, and internationalized business environment and treat domestic and foreign companies without discrimination."

Another reason cited is that companies feel burdened by the US government's excessive reshoring policies. The Trump administration is reportedly considering measures such as corporate tax cuts and covering return costs as incentives to bring back domestic companies operating overseas.

This content was produced with the assistance of AI translation services.