CONFERRING WITH CONFIDENCE

By Li Xiaoyang

Entering China in the late 20th century， U.S.-based Boston Consulting Group（BCG） has been observing the Chinese market for decades. The company is a member of the Boao Forum for Asia （BFA）， a platform for promoting regional economic integration. This year， the digital economy continues to be one of the major topics of the BFA Annual Conference set to take place in Boao， Hainan， an island province of China， from April 20 to 22. It’s also a pivotal point for many a BCG business.

According to a BCG report released in March， Chinese enterprises are advancing their digital transformation， yet some find it hard to leave behind the traditional modi operandi. For these companies， BCG has designed the World Class Technology Function， a method to evaluate a business’ tech capacities and provide solutions to encourage progress.

Like BCG， many U.S. enterprises have developed close ties with the Chinese market. Despite the COVID-19 pandemic and trade uncertainties， they still show confidence in a market that is continuously expanding， improving and opening wider.

According to the 2022 China Business Climate Survey Report， jointly released by the American Chamber of Commerce in China（AmCham China） and PricewaterhouseCoopers in March， some 60 percent of the roughly 160 companies surveyed， said they had turned a profit in China in 2021； two thirds of them planned to increase their investment in China in 2022. Nearly two thirds of AmCham China’s member companies listed China among the top three of the world’s investment destinations. Over 80 percent of enterprises had no intention to move their manufacturing or purchasing chains out of the country.

American businesses do face rising challenges， varying from external uncertainties to the pandemic and mounting operating costs. Nearly 99 percent of respondents said the COVID-19 resurgence had affected them， and 54 percent have decreased 2022 revenue projections following the epidemic flare-up. Around 50 percent of those surveyed are satisfied with China’s COVID-19 prevention and control measures， the report read.

Many American enterprises said they would continue their investment and business expansion in China.

ExxonMobil launched a project in Huizhou， Guangdong Province， to produce performance polymers used in packaging， automotive and agricultural products. With a total investment of roughly $10 billion， the project is set to be completed this year. It is expected to upgrade China’s petroleum and chemical industry and lift competitiveness of the Guangdong-Hong Kong-Macao Greater Bay Area.

Snowboard manufacturer Burton Snowboards has been selling products in China since 2002. Craig Smith， CEO of Burton China， told AmCham China， Burton has invested heavily in the country since Beijing won the host bid for the 2022 Olympic and Paralympic Winter Games in July 2015， adding 12 additional staff members to its China office and conducting more market research on Chinese consumers.

Smith predicts China will feature the largest snow industry worldwide within five years as the country’s skier numbers have been on the up and up in recent years. According to him， the amount of ski trips in China has been growing by 20-30 percent each year on average since 2015. Government and private investment in infrastructure， too， have provided the industry with major driving forces. Burton plans to ride China’s winter sports drive to new heights.

American businesses have cast their vote of confidence in the Chinese market as the report suggested. As China has seen economic growth backed up by strong internal momentum and is further opening up and honing its market， global businesses will get more opportunities.

U.S. enterprises that have profited in China have in turn contributed to the growth of the Chinese economy. For mutual benefits， “It is our hope that the U.S. Government could embrace a vision of openness， inclusiveness， mutual benefit and win-win outcomes， stop unjustified restrictions against Chinese enterprises， and create enabling conditions for the sound development of China-U.S. economic and trade cooperation，” Chinese Foreign Ministry spokesperson Zhao Lijian said at a press conference on March 8.

“China is the world’s largest market for logistics， tourism and fin-tech. It is expected to become the largest market for medical and elderly care as well as art trading. As service consumption in China has soared， China and the U.S. can expand cooperation in related fields to improve trade ties，” Chi Fulin， head of the Hainan-based China Institute for Reform and Development， told Beijing Review.

China has been opening up its domestic market by shortening the negative list for foreign investment over the past few years， unlocking various sectors and boosting its pilot free trade zones （FTZs）.

Hainan， with its FTZ and free trade port （FTP） well underway， has become a frontier in the process， attracting global investors， businesses and talents. The BFA’s annual conference aside， Hainan， with its growing array of duty-free shops， has also hosted the China International Consumer Products Expo— starting from last year.

Many U.S. enterprises and institutions， including electric vehicle manufacturer Tesla， Tricon Global Restaurant Inc. and Michigan State University， have launched branches in Hainan. General Electric （GE） signed cooperation agreements with the provincial government in 2020.

Entering Hainan in 2020， Tesla introduced service and delivery centers in Haikou and Sanya in 2021， as the company eyes the FTZ’s prospects for the newenergy vehicle （NEV） industry. It has built no fewer than 16 charging stations in the province.

Hainan’s warmer climate is more conducive to NEV consumption promotion， as the batteries discharge more quickly in colder regions.

According to GE， it will deepen collaboration with the provincial government in aerospace， medical care， clean energy and digital growth to support the Hainan FTP.

In addition to attracting global businesses， Hainan has also received a boost from domestic demand. According to official statistics， its duty-free shops raked in around 60.2 billion yuan （$9.4 billion） in 2021， an increase of 84 percent year on year.

Hainan is expected to become the world’s largest offshore dutyfree consumption market worth 160 billion yuan （$25.1 billion）. Affected by the pandemic， many people who used to consume abroad are now headed to the island’s duty-free shops， the potential of which has yet to be fully unleashed. The province needs to expand these shops by enhancing management and services， as it aims to introduce a customs clearance operation across the island by 2025 and develop a full-fledged FTP by 2035， Chi said.

According to Chi， more efforts are necessary for Hainan to formulate regulations on dutyfree shopping， develop services in line with international standards and cooperate with Hong Kong in duty-free businesses. The province should also seize the opportunities created by the Regional Comprehensive Economic Partnership， the world’s largest free trade agreement comprising 15 Asia-Pacific economies including China， to transform Hainan into a gateway for cross-border exchanges， he concluded. BR