“Among the three major foreign-funded enterprise set-ups in Guangdong, namely, trading, manufacturing and service, the number of service enterprises has been increasing rapidly in recent years,” Joanne Wang, Guangdong Markets Leader of PwC China, told GDToday. She also highlighted that the layouts of foreign enterprises tend to be more differentiated to match with the specific industrial factors of Guangdong cities.

Guangdong has been a favorable investment destination to foreign-invested enterprises in China. The presence of foreign companies and investment cover a wide range of business sectors, including retail, auto, manufacturing and energy.

“Guangzhou and Shenzhen, two major cities of Guangdong, have been leading the country regarding indicators such as intellectual capital, technology and innovation, ease of doing business over the past five years,” Wang cited the Chinese Cities of Opportunity report launched by PwC.

Wang explained while most foreign companies in the service sector prefer settling in Guangzhou and Shenzhen, those in the manufacturing sector are more sensitive to industrial land prices. “Foreign manufacturers might consider western or northern Guangdong cities once they have plans for relocation or industrial upgrade,” she said.

However, capital cities such as Wuhan, Xi’an and Nanchang have become increasingly competitive since the industrial relocation trend started in 2021 nationwide, making it challenging for western or northern Guangdong cities to attract foreign investment. Wang suggested the Guangdong government should address the challenge through overall strategic planning, and considers the investment of German chemical giant BASF in Zhanjiang a good example of such an effort.

Being a deputy to the 14th Guangdong People’s Congress, the top legislative body of the province, Wang said that the Congress was deliberating a strategic layout for the manufacturing industries, through which it could differentiate local industrial plans based on specific industrial factors and eventually stimulate sustainable and high value-added development.

“For example, electronics-based advanced manufacturing will be planned on the east bank of the Pearl River Estuary, namely, Shenzhen, Dongguan and Huizhou, while large-scale urban rail and machinery manufacturing will be planned in the west bank cities such as Foshan, Jiangmen, Zhongshan and Zhuhai,” she elaborated.

She added that west Guangdong cities such as Zhanjiang will focus on the chemical, energy and maritime industries. Moreover, east Guangdong cities, including Shanwei and Shantou, will emphasize the development of new materials and the digital economy.

“The number of senior executives that visited China right after the country optimized its Covid-19 management in January is beyond our expectations. It sent a good signal that they are still optimistic about the potential and business environment in China,” said Wang. She believes China is still significant to most foreign companies due to its large market size and growing consumption ability.

Data released by China’s Ministry of Commerce show that foreign direct investment in the Chinese mainland, in actual use, expanded 6.3 percent year on year to 1.23 trillion RMB (about 179 billion USD) in 2022.

According to Wang’s analysis of the FDI growth, foreign investors increased their presence in China to improve cost-effectiveness and be more competitive in serving the Chinese market. “More and more foreign manufacturers are expanding their layouts in China while some are withdrawing, which indicates that they have more consideration for manufacturing and supply chain security. It is a trend rapidly being formed worldwide and worth noticing,” she said.