China rust belt opens door wider to foreign investors

The EU business chamber has observed an uptick in foreign entrepreneurs arriving in Shenyang in recent years. Above, workers manipulate a machine to produce car interior pieces for a major European carmaker. (AFP)
Updated 24 September 2017
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China rust belt opens door wider to foreign investors

SHENYANG, China: Trucks carrying hi-tech car components rumble in and out the gates of an American industrial zone in the heart of China’s rust belt — using roads that the city especially renovated for the complex.
While foreign firms complain about being locked out of large swathes of China’s vast market, the door has cracked open a bit wider in northeastern Liaoning province as the authorities seek to revive the recession-hit industrial region.
The bustling activity at the Shenyang American Industrial Park, which hosts international suppliers for global car brands, stands in contrast with the darkened windows and empty parking lots of the moribund Chinese factories nearby.
Foreign firms feel more welcome in the provincial capital, Shenyang, and in parts of the southwest, than anywhere else in the country, according to a survey by the European Union Chamber of Commerce in China.
“The local government offers many benefits, such as easing company registration, providing discounts for factory and office space and giving family members three-year visas,” said Harald Kumpfert, chairman of the EU chamber’s Shenyang chapter.
Elsewhere, companies are increasingly voicing frustration about investment barriers in sectors from automotive to finance, while China subsidizes its own domestic businesses.
The EU business chamber issued an annual report on Tuesday saying companies were “suffering from accumulated ‘promise fatigue’” as the government has yet to follow through on pledges to open the market.
And while Liaoning is more welcoming, Kumpfert said that after setting up shop, businesses in Shenyang face similar obstacles, including lengthy waits for permits and “unclear” regulations.
Settling in China can also come at a price: at least one-fifth of EU companies said they have had to share their technology in exchange for market access in the aerospace, machinery, environment, auto, utilities and primary energy industries.
Still, the chamber has observed an uptick in foreign entrepreneurs arriving in Shenyang in recent years.
Businesses that specialize in renewable energy, tourism, agriculture or advanced technology are well positioned to succeed in Shenyang as the city addresses pollution and undergoes a “painful restructuring process”, Kumpfert said.
The Liaoning Pilot Free Trade Zone was launched earlier this year, and construction continues in the 48-square-kilometer Sino-German Intelligent Equipment Manufacturing Park in Shenyang, which hosts BMW, Siemens and BASF.
The city’s Bureau of Foreign Trade and Economic Cooperation said data on foreign investment was not immediately available.
China’s northeast has long relied on state-owned enterprises plagued with severe overcapacity in heavy industries that have crippled the economy, costing thousands of jobs.
Liaoning was the only province in the country that was officially in recession in 2016, with its economy contracting by 2.5 percent. The province also admitted to faking economic growth figures from 2011 to 2014.
“All these government projects have ignored principles of supply and demand and created all these problems,” said Jason Lee, a director of business development for Eastern America, which bought the land from the city to build the Shenyang American Industrial Park.
“Nowadays, there is more government support for foreign businesses here. There’s a lot to catch up on, but now they want to work with us as a team,” Lee told AFP, adding that city officials sometimes accompany him to meetings to woo foreign clients.
A Shenyang car insulation factory manager, Li, is pinning his hopes on foreign capital to help the region.
“If more people come and invest, then the whole environment will improve. Employment, revenue, and other aspects will all get better,” said Li, who declined to give his first name because he was not authorized to speak with the media.
But at the Shenyang German Sino-Service Center, most of the offices in a new building were recently empty, showing that the process can still be slow.
Wolfgang Wagner, chief operating officer of the center, says it was not out of lack of interest — two dozen foreign companies have applied to join but they have struggled to get legal permits to allow them to rent in a government-owned building.
“First we thought they could move in 2018,” he said. “Now it’s not going to be until 2019.”


Malaysia reviews China infrastructure plans

Malaysia’s former PM Najib Razak (AFP)
Updated 3 min 51 sec ago
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Malaysia reviews China infrastructure plans

  • Malaysia's scandal-mired former PM Najib Razak signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port.
  • New Prime Minister Mahathir Mohamad has announced a planned high-speed rail link between Kuala Lumpur and neighboring Singapore will not go ahead as he seeks to reduce the country’s huge national debt.

KUALA LUMPUR: Malaysia has been a loyal partner in China’s globe-spanning infrastructure drive, but its new government is to review Beijing-backed projects, threatening key links in the much-vaunted initiative.

Kuala Lumpur’s previous regime, led by scandal-mired Najib Razak, had warm ties with China, and signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port.

But the long-ruling coalition was unexpectedly voted out last month by an electorate alienated by allegations of corruption and rising living costs.

Critics have said that many agreements lacked transparency, fueling suspicions they were struck in exchange for help to pay off debts from the financial scandal which ultimately helped bring down Najib’s regime.

The new government, led by political heavyweight Mahathir Mohammed, has pledged to review Chinese deals seen as dubious, calling into question Malaysia’s status as one of Beijing’s most cooperative partners in its infrastructure push.

China launched its initiative to revive ancient Silk Road trading routes with a global network of ports, roads and railways — dubbed “One Belt, One Road” —  in 2013.

Malaysia and Beijing ally Cambodia were seen as bright spots in Southeast Asia, with projects in other countries often facing problems, from land acquisition to drawn-out negotiations with governments.

“Malaysia under Najib moved quickly to approve and implement projects,” Murray Hiebert, a senior associate from think-tank the Center for Strategic and International Studies, told AFP.

Chinese foreign direct investment into Malaysia stood at just 0.8 percent of total net FDI inflows in 2008, but that figure had risen to 14.4 percent by 2016, according to a study from Singapore’s ISEAS-Yusof Ishak Institute.

However, Hiebert said it was “widely assumed” that Malaysia was striking quick deals with China in the hope of getting help to cover debts from sovereign wealth fund 1MDB.

Najib and his associates were accused of stealing huge sums of public money from the investment vehicle in a massive fraud. Public disgust at the allegations — denied by Najib and 1MDB — helped topple his government.

Malaysia’s first change of government in six decades has left Najib facing a potential jail term.

New Prime Minister Mahathir Mohamad has announced a planned high-speed rail link between Kuala Lumpur and neighboring Singapore will not go ahead as he seeks to reduce the country’s huge national debt.

The project was in its early stages and had not yet received any Chinese funding as part of “One Belt, One Road.” But Chinese companies were favorites to build part of the line, which would have constituted a link in a high-speed route from China’s Yunnan province to trading hub Singapore, along which Chinese goods could have been transported for export.

Work has already started in Malaysia on another line seen as part of that route, with Chinese funding — the $14-billion East Coast Rail Link, running from close to the Thai border to a port near Kuala Lumpur.

Mahathir has said that agreement is now being renegotiated.

Other Chinese-funded initiatives include a deep-sea port in Malacca, near important shipping routes, and an enormous industrial park.

It is not clear yet which projects will be amended but experts believe axing some will be positive.

Alex Holmes, Asia economist for Capital Economics, backed canceling some initiatives, citing “Malaysia’s weak fiscal position and that some of the projects are of dubious economic value.”

The Chinese foreign ministry did not respond to request for comment.