Currently, there is a kind of political and economic tendency throughout China, which consists in the fact that the municipal authorities of the Asian country are making efforts to retain overseas businesses and increase the trust of local companies, and in this context, the indicative is the example of the leadership of Henan Province, which called on Foxconn, specializing in the manufacturing of electronics, to maintain investment confidence in the region.
It is worth noting that Beijing, in the context of the circumstances of the present historical moment, is faced with such a circumstance as the shift of supply chains. The corresponding process is what can be described as a consequence of the high level of tension observed in the space of geopolitical relations. This negative tendency in a generalized sense belongs to the category of global manifestations of the current specifics of the existence of human civilization in the context of its dimensions such as international interaction. At the same time, for Beijing, the relevant circumstances of reality are the most sensitive among other world capitals.
Currently, tensions are growing in the space of relations between the United States and China. This state of affairs, as a kind of political condition, has already generated such a negative impact factor on the economic and technological capabilities of the Asian country as restricting Beijing’s access to advanced chips and equipment necessary for the manufacturing of corresponding products. The United States has also repeatedly stated its intention to continue implementing the relevant political concepts concerning China. Policymakers in Washington argue that Beijing can use advanced technology to enhance its military capabilities. Within the framework of the relevant rhetoric, they explain the need for restrictive measures against Beijing as an action aimed at ensuring national security. Against the background of the high probability of further bans on trade interaction with China from the United States, many companies are beginning to diversify their activities, production, and supply chains outside the Asian country. Against the background of the corresponding sentiments in the business environment, Beijing faced the problem of weak investor confidence. From the point of view of economic prospects, the perception of interaction with China by the sources of financing is in a certain sense threatening. The most obvious problem in the context of the potential probabilities of the future is the limitation of the growth potential of the Asian economy, which is currently the second largest in the world.
The Governor of Henan Province, Wang Kai, expressed hope that Foxconn would remain confident in its investments in the region, focusing on the cultivation of new industries and the development of new technologies. He also stated that the mentioned province, together with the electronics producer, will build a high-end manufacturing chain and an ecosystem for strategic emerging industries. Moreover, Wang Kai stated the desire of the region to accelerate construction and improve the efficiency of signed projects. He also said the desire of the province to sign and start the implementation of projects under negotiation as soon as possible. This statement was made during the signing ceremony in the capital of the region Zhengzhou the agreement on strategic cooperation between Henan and Foxconn, which is officially known as Hon Hai Precision Industry.
Wang Kai also promised to form a mechanism for regular communication and strengthen comprehensive service guarantees to generate better conditions for the development of Taiwanese business in the province.
The world’s largest iPhone manufacturing plant in Zhengzhou, Henan, has faced pressure after Apple began the diversification process last year. This is one of the significant examples of how the state of affairs that defines the condition of reality in the geopolitical environment has an impact on business, including those related to production activities.
Returning to the topic of Washington’s restrictions on Beijing, it is worth noting that the measures already introduced and the realistic prospect of continuing to implement and strengthen the relevant policy, as unequivocally stated by the US authorities, are a kind of motivational platform for diversification, the scale of which at the same time does not go beyond Asia, since this region is very an important and promising market. Companies are interested in maintaining their Asian presence. In this case, India and Vietnam are most often considered likely alternatives to China as a manufacturing center. It is worth noting that some companies have already started implementing relevant projects. For example, in July it became known that Foxconn will invest more than $550 million in Vietnam. In October, HP announced its intention to manufacture Chromebooks in India.
As for Foxconn’s activities in China, in this case it should be noted that at the end of 2022, the company faced a massive attrition of workers due to concerns regarding the coronavirus. This was followed by protests over employee payments. Against the background of this circumstance, the process of Foxconn’s activities in China was disrupted. The company is also involved in diversification. The main areas of relevant efforts outside China, but within the borders of Asia, are India and Vietnam. In this context, it is also worth noting that diversified production activities are a kind of guarantee that the company will not face sanctions from Washington and its allies due to excessively close interaction with Beijing.
Data released by Zhengzhou Customs indicates that smartphone exports from Henan in the first half of the current year amounted to 13.95 million units. This figure is about 50% less than the result for the same period in 2023.
Foxconn is investing 1 billion yuan ($139 billion) in Zhengzhou. This funding will be spent on the construction of a new headquarters, including research centers and centers for strategic industrial development. Foxconn will also accelerate the implementation of projects related to the production of electric vehicles and batteries, digital healthcare, and robotics.
Against the background of the implementation of the trend of diversification, which is showing signs of strengthening, China’s status as an investment destination is beginning to weaken. It is worth noting that in this case, the factor shaping the current state of affairs is not only the situation in the space of geopolitical relations. Investors’ attention to China is also falling due to realities such as the lack of transparency in the local political environment and the slow growth of the Asian country’s economy. Beijing has not yet taken decisive measures to support the economic system. At the same time, investors and markets expected and continue to expect appropriate decisions.
Data released by the Chinese Ministry of Commerce shows that foreign direct investment in the Asian country in the first six months of the current year amounted to 498.91 billion yuan. This indicator decreased by 29.1% year-on-year.
This month, the mayor of Wuhan, located in Hubei Province in Central China, also promised support and policy assistance for investors. Mayor Sheng Yuechun announced his intention to form a first-class business environment, deepen reforms to effectively accomplish tasks, and facilitate the immediate start of the project after the acquisition of land.
