SFC Markets and Finance｜Harley Seyedin: 76% of companies studied plan to reinvest in China in 2024

南方财经全媒体记者 杨雨莱  广州报道

"The Two Sessions are very important to U.S. because it determines the future development of China." Harley Seyedin, President of the American Chamber of Commerce in South China said in the exlcusive interview before the Two Sessisons.

Despite the rising tide of deglobalization and protectionism, China has remained committed to high-standard opening-up to boost foreign investment, providing much-needed certainty and opportunities to global businesses. Seyedin said, “Overall, the mood is positive, it's cautious, but it is positive. We do believe that the investment is gonna continue in China”.

The 2024 Special Report on the State of Business in South China showed that 76% of the companies studied plan to reinvest in China in 2024, a rise of 1% compared with 2022 and 88% of the companies studied in the report have already made profits in China. 

Towards the development of the Greater Bay Area, Seyedin considers that the future of the Greater Bay Area is going to be bright, stating “We're gonna be investing heavily in this area and we're gonna benefit from it equally”. 

Chinese market offers a future promise

SFC Markets and Finance: how was the overall development and performance of the foreign enterprises in China in the past year? Are there some figures in the reports that can adequately show that？

Harley Seyedin: Certainly, we released the 2024 Special Report on the State of Business in South China. It's our 20th such annual report. And of course, we're very happy to see results are quite positive. American companies remained cautiously optimistic towards the recovery of China's economy. 90% of our companies remain profitable during even though with 3 years of very hard time with COVID-19. And we know that more than 60% of our companies reinvested last year to expand their existing businesses. And we do know that over 60% of them plan or reinvest in 2024 in order to continue to capture additional market share. Overall, the mood is positive, it's cautious, but it is positive. We do believe that the investment is gonna continue in China. 

SFC Markets and Finance: What further investment areas will foreign enterprises paying more attention to in China？

Harley Seyedin: You have to look at that, China is not losing its appeal as a manufacturing center. The reality is very much like Japan which was the workshop of the world after the World War II. And as it developed its own technology, moved up the value chain and had no longer had unskilled labor, it moved a lot of its production to South Korea, and ultimately to Taiwan and Hong Kong. And ultimately everyone came to Chinese mainland to manufacture. Those days of cheap labor, cheap land in China are over. The movement is a natural transition. And it's not that China lost its luster as an investment center, the reality is that the investment will continue in China.

Because at the same time, China has developed probably the second largest consumer market in the world, where we can actually supply, serve and we can sell to. As a result of that, the investments in China are going to be higher technology investments, more robotic manufacturing processes, things that require less labor, less land, but also much more efficient, both technologically and a lot better on the environment itself. It's a natural transition. You can't say it's a negative thing. It's actually a very positive thing because China's consumer market grew by 7% last year, where exports grew at less and of course fixed investment was even lower than that. At the consumer market, consumer spending is what actually delivered the 5.2% increase in GDP growth last year. That is a very good direction for China to go. As you know, 70% of the U.S. GDP comes from the services and consumer expenditure. Hong Kong is 75%. China is going to need to achieve that number as it grows and grows out of being the workshop of the world to a consumer-based society. The transition is quite normal. It is quite helpful to China. It is an natural transition which is very important to happen.

SFC Markets and Finance: As you just mentioned that most foreign companies will continue to invest in China. Can you explain more or elaborate on it? Like what size will the foreign enterprises invest in China? 

Harley Seyedin: Certainly, one of the parts of our study shows as it has year after year that more and more of American companies in South China are producing goods and services in China for the Chinese market. In fact, that number is now roughly 73% of our member companies in South China are producing goods and services in China for Chinese market. They're not in the export business. For those who still export some products out of China, only 60% exported to the United States. So the export part of our American companies in China is far less than it's expected and far less than people think. The reality is that on the other hand, China's consumer market is continuing to grow. Our companies have been here for more than the fifteen, twenty years. The majority of our companies have already captured most of the market share in South China. They are looking for additional markets in China to capture and expand their services. To do that, they will have to continue to reinvest. They have to continue to build better, more modern robotic factories, in order to produce the goods and services that are needed in the Chinese market.

Therefore, the Chinese market offers a future promise that we want to do in many, many areas. We are the dominant companies in consumer products and we want to continue to be there. To do that, we have to reinvest we have to continue to be a part of China's growth and economy and we're gonna continue to do that.  

The future of the Greater Bay Area is going to be bright

SFC Markets and Finance: As I heard in the press conference that the American Chamber has foreseen that the slowing down of China's economy in 2022 and 2023. How do you view the potential development momentum of China's economy in the future? And what role will it play in the global economy？ 

Harley Seyedin: Sure, the slowdown in China's economy in 2023 was not unexpected. It would look to be following the 3 years of COVID-19, no foreign experts being able to come to build the factories that we needed. We know that three out of every four factories that were planned to be built in China were not built. Therefore, if you don't build the factories, usually you won't have the GDP growth level that you want 3 years later, because big factories take about a year or two to build and a year or two to train and to produce. So they won't contribute to the GDP for about three more years.

What we have seen, on the other hand, from this year's study is that people back in investing in greater numbers again, and that's going to take probably another year or so before the GDP returns to the normal levels of the past. The reality is that the future remains optimistic our companies have said that 51% feel that actually the business environment improved in 2023, a majority feel that going forward the future is optimistic. And of course, when people have confidence and are optimistic, they make the investment. We're gonna be a big part of China's recovery.

The Two Sessions are very important to U.S. because it determines the future development of China. The 15th 5-year plan will be coming up very soon. We want to make sure that our ideas and our thoughts and our contribution to the development of the 15th 5-year plan are going to happen as we would like it to do because we are a big part of the economy. Reality is that 1/3 of China's GDP depends on the foreign direct investment. That has happened in the past and going future is going to be the same. So yes, we're very interested in what the Two Sessions will do. We know that primary focus is going to be foreign direct investment and bring in over and further opening up.

SFC Markets and Finance: This year also marks the 5th anniversary of the《Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area》, how do you view the current business environment and foreign investment environment right now in the GBA and which aspect might it improve in the future？ 

Harley Seyedin: One of the realities is that the numbers show that the GBA has already surpassed the San Francisco Bay Area, the New York Bay Area. It's caught up to the Tokyo Bay Area. We expect by next year it will surpass to all three other major bay areas in the world. The GBA represents an amazing location which I expect will be the driver of the future of China as a whole, because you have Hong Kong that offers legal services, financial services, freely convertible currency, which is really needed in order for any economy to grow. You have Macao that offers all kinds of entertainment and pleasure services so that people can live a happy life and be a part of the society as a family. And of course, you have the nine cities and the mainland. When you move up to Shenzhen, Shenzhen is offering top universities, postgraduate degree programs that will contribute to other human resources that are needed for the continued growth of the area. You have Dongguan that is going to continue to offer high-tech manufacturing,  robotic and high-tech manufacturing. Guangzhou, as a regional headquarters for companies. What I mean by regional headquarters will be Asia Pacific regional headquarters that can be set up in Guangzhou, as well as its ability with the university city in Guangzhou city, in other parts of Guangdong province. I think the reality is that the future of the Greater Bay Area is going to be bright. We're gonna be investing heavily in this area and we're gonna benefit from it equally.

SFC Markets and Finance: Guangdong is the province attracting most foreign enterprises in here. How should the foreign enterprises and local companies cooperate more in the future？

Harley Seyedin: I think the reality is that we continue to work with our counterparts in China and we have an excellent relationship between our companies and our partners in South China. Most of our manufacturing is actually not done by our own companies, but by OEMs. And the Chinese companies who manufacture the various parts and components that will be produced to sell primarily in China. The continued relationship is going to be great. And as a result of that, both Chinese and American companies will continue to grow in here South China.

U.S. is open for investment by Chinese companies in most areas

SFC Markets and Finance: This year, with the upcoming of the U.S. presidential elections, what do you think this might affect or impact on the U.S.-China trade relations？

Harley Seyedin: Politics is always unpredictable. We don't know who is going to be elected to run as a president of the United States in the next 4 years. That's going to determine the part of the U.S.-China relations if it’s gonna work. But I do expect that because we are the two largest economies in the world. Our economies are intertwined. The fact is that millions of Americans depend on their jobs based on the business relationship with China and millions and millions of Chinese depend on their jobs for the exports and other relationships with the United States, that our business relationship is going to continue. Now the reality is this, we do have major differences, our governments have major differences between themselves, but the areas that we have in common between the U.S. and China are far more than the differences that we have. I expect that the future is going to involve cooperation between the U.S. and China, because the two countries are going to continue to lead the world into future prosperity.  

SFC Markets and Finance: Last year, the market still worried about the technical recession of U.S. economy, but this year we have the market consens U.S. that for the U.S., it is more likely to have a soft landing. What do you think this might affect the U.S. reinvestment in China？

Harley Seyedin: The reality is that our investments in China are no longer driven by export manufacturing. They are driven by the desire of our companies to produce and sell goods and services in China for the Chinese market. Therefore, we want to continue be part of the Chinese economy. In order to maintain and protect our market share, we will have to continue to invest here. At the same time, contrary to the popular belief the U.S. is open for investment by Chinese companies in most areas. I think Chinese companies will need to begin to invest in the U.S. in order to capture additional market share that they have and introduce their products and services in the U.S. as we do in China.

China and U.S. work together for the future development AI

SFC Markets and Finance: As we know that Sora launched by OpenAI recently has just become a very hot topic around the world. Do you think there will be more cooperation in AI industry between China and the U.S. in the future? 

Harley Seyedin: In fact, the last year, one of the agreements the U.S. and China received was management of AI and AI development. The two countries already have an agreement. They work together for the future development AI. It certainly needs to be regulated in a proper way to make sure the consumers and the population of both countries are protected in the process. AI has been with U.S. for many years. It is just beginning to develop in a way that people are taking notice. And I think the future of AI is going to help humanity in a great way. As long as the two countries are willing to work together, which I think they are. 

SFC Markets and Finance: In your opinion, will AI such like Sora make people lose their job in the near future?

Harley Seyedin: I remember the same question was asked when the personal computer was first invented, where people thought they would lose their jobs, it would replace many people. In fact, personal computers created hundreds of millions of jobs around the world that did not exist before. Many people have gotten rich as a result of it. AI is just another tool for humans to move into the next level of development of human face. I think it's simply going to eliminate a few jobs. But at the same time, it's gonna create thousands times more jobs than existed before.

策划：于晓娜

监制：施诗

责任编辑：李依农

记者：杨雨莱 

制作：蔡于恬

拍摄：实习生胡嘉美 实习生关晋安

新媒体统筹：丁青云 曾婷芳 赖禧 曾昭发

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出品：南方财经全媒体集团