Despite China’s amazing transformation and economic progress over the past 30 years, there remains one unanswered question that continues to frustrate their leaders: “why won’t foreign companies establish their regional headquarters on Chinese soil?”. Imagine how successful China would look to the rest of the world if the likes of Google, Apple, Microsoft and Amazon were willing and able to build and operate a glittering modern campus in mainland China and employ thousands of young Chinese graduates?
China’s frustration in attracting foreign companies has not come without trying. Who can forget the global marketing campaign that went into promoting the Shanghai Free Trade Zone in 2013, the first of what now adds up to 21 Free Trade Zones (‘FTZ’) across China, offering lower taxes, streamlined customs clearance, a relaxation of regulations and, in particular, financial incentives and subsidies for foreign companies who set up a local office, factory or R&D facility. I have visited many of them myself and been hosted by local Government officials who have laid out an impressive vision of the future, including plans for massive new infrastructure, industrial parks and financial incentives, which would be hard for any globally-minded entrepreneur to ignore.
The latest FTZ campaign was launched in June last year to promote the Hainan Free Trade Port which offers preferential policies on trade facilitation, import and export duties, and customs supervision on the southern island of Hainan, a popular holiday destination often referred to as “the Hawaii of China” due to its tropical climate, forests, sandy beaches, sleepy towns and restful resorts. Hainan has the advantage of being the only FTZ which operates on an island which is physically separated from the mainland by sea, giving the impression that it retains some autonomy and independence, and “is on track to become the biggest duty-free market in the world in the next two years”, according to KPMG.
However, despite all of the planning, the expensive overseas delegations and promotional campaigns, the high level visits, and the massive financial outlay, the prospect of a large and well known western company setting up a sizeable presence in China in the current geo-political climate is almost unthinkable, if not laughable. Foreign companies looking to tap into China’s large and rapidly growing consumer market will be looking for new cities and locations from which to establish their regional presence. This opens up opportunities for new West-East Gateways to emerge.