Sophisticated supply chain networks encourage foreign investors to expand

China's foreign investment landscape is undergoing a structural shift toward high-tech and innovation-driven industries as the country's industrial upgrading and growing demand for advanced technologies create new growth opportunities for multinational companies, economists and business executives said.

The shift reflects China's efforts to foster higher-value industries, particularly artificial intelligence, intelligent manufacturing, biopharmaceuticals and green technologies, they said.

Huo Jianguo, former president of the Chinese Academy of International Trade and Economic Cooperation, said China's technological innovation and increasingly sophisticated supply chain network are encouraging foreign investors to expand their presence in research and development, advanced manufacturing and emerging technology sectors.

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Huo said closer collaboration between foreign and domestic firms is also helping integrate global expertise with local market needs, thus supporting the development of more consumer-centric products and services.

That view is in line with the latest data. Foreign direct investment in China's high-tech enterprises rose 35.1 percent year-on-year to 200.26 billion yuan ($29.92 billion) in the first eight months, accounting for 41.7 percent of the country's total incoming FDI, up 12.4 percentage points from a year earlier, said the Ministry of Commerce.

Speaking at the launch ceremony of the China Development Report 2026 in Beijing in late September, Fan Gang, a prominent Chinese economist, said China's economic development has benefited not only from its comparative advantages, but also from its ability to attract and incorporate advanced technologies and management expertise through foreign investment and international exchanges.

Fan said opening-up and foreign investment have helped Chinese industries move closer to the global technological frontier, enabling domestic firms to strengthen their innovation capabilities and gradually shift toward higher-value operations.

Marshall Mills, senior resident representative in China of the International Monetary Fund, said China has made substantial progress in innovation, but further reforms and better designed policies could help translate tech breakthroughs into stronger productivity growth.

Mills said more efficient capital allocation, stronger innovation incentives and further development of capital markets would help the country unlock additional growth potential and capitalize on more of the economic benefits generated by AI.

Reflecting the growing role of China in foreign firms' innovation strategies, Germany's Freudenberg Group — which operates 30 plants and employs more than 7,000 people in China — has made the country a base for its humanoid robotics R&D efforts, opening a co-creation center in Shanghai in mid-September.

Claus Moehlenkamp, Freudenberg's CEO, said China has evolved from a manufacturing powerhouse into an innovation-driven economy, giving the country a growing role in the firm's global innovation and production network.

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In humanoid robotics, Freudenberg plans to develop technologies and robot-related products in China — including sealing, lubrication and vibration-control components designed to improve robots' performance and service life span — for both the domestic and foreign markets, drawing on the country's fast-evolving robotics ecosystem, manufacturing capabilities and supply chains.

Americhem Inc, a US producer of specialty plastic compounds and additives, put a new clean compounding facility into operation in Suzhou, Jiangsu province, late last month. The investment will enhance the company's capacity to serve customers in China and other Asia-Pacific markets.

John Richard, CEO of Americhem, said this move will bring the company's technical expertise and production capabilities closer to customers in the Asia-Pacific region, particularly those in the healthcare sector.

Contact the writers at zhongnan@chinadaily.com.cn