72% of companies with overseas investment resume production in China, thanks to tax cuts

Two chartered planes belonging to China Southern Airlines brought 136 South Korean technicians and supplies representatives from Seoul to Wuhan, Hubei province, on May 1 as part of a move to restart business and production.

They work at three technology companies in Wuhan, the city that was hit hardest by COVID-19.They were the first group of more than 500 South Korean technicians these companies are expected to bring back via chartered flights to the city.

The three companies, Wuhan China Star Optoelectronics Technology Co, Wuhan Tianma Microelectronics Co, and Yangtze Memory Technologies Co are the leading ones in Hubei's strategy to build the chip, screen and user terminal industries.

Dozens of South Korean technicians and suppliers play key roles in the three companies, which produce hi-tech products, including tablets, high-end smartphones, automobile electronics and 3D NAND flash memory, a type of memory cells that are stacked vertically in multiple layers.

These companies are located in Wuhan's East Lake High-Tech Development Zone, which is also known as the Optics Valley of China.

The zone, founded in 1988, is one of the three national independent innovation demonstration zones.

During the pandemic, the people of China and South Korea were hardly able to travel to the other side. But an increasing number of people from South Korean companies have come to China in recent days as China is speeding up efforts to restart business and production.

Some 250 technicians from LG Chem and LG Display flew to Nanjing, Jiangsu province, via a direct flight arranged by South Korea's Asiana Airlines on May 3, according to Yonhap News Agency.

The top diplomats of China, Japan and South Korea held a videoconference on March 23 to discuss joint efforts to tackle the new coronavirus outbreak.

The call between State Councilor and Foreign Minister Wang Yi and his South Korean and Japanese counterparts, Kang Kyungwha and Toshimitsu Motegi, respectively, came as the countries have been seeking to step up communication to share views about their containment efforts and practices on COVID-19.

Setting precedent

At their April 29 video dialogue on fighting the coronavirus outbreak, officials from Chinese and South Korean foreign ministries agreed to expedite Customs procedures on May 1, setting a precedent in institutionalizing exceptional entry.

Under the agreement, South Korean business people having invitations from Chinese local governments, and valid Chinese visas and health certificates, were allowed to enter 10 Chinese cities and provinces directly.

A recent survey of 8,700 foreign-invested companies in China, conducted by China's commerce ministry, showed that 72.8 percent of them have resumed their business and production, thanks to tax cuts and exemptions in the country, according to China Securities News.

Analysts believe that by restarting businesses and production one after the other, the foreign-invested companies have shown their confidence in China, it said.

In late February, when Perfetti Van Melle Confectionery (Shenzhen) Co restarted its production, its production capacity was less than 10 percent as against the same period last year.

The company was given tax cuts and exemptions of more than 4 million yuan ($563,655) immediately, China Securities News reported.

Relieved from funding pressure, it resumed 90 percent of its production capacity in late April.

In the 2020 Special Report on the State of Business in South China, released in March, Harley Seyedin, president of American Chamber of Commerce in South China, said, "Our nations must cooperate to preserve a prosperous international order. US-China ties would be a stabilizer for bilateral relations.

Both sides should strengthen strategic communication to avoid misunderstandings and misjudgment. Together, we can right the wrongs of the past and deliver a future of economic justice and security."

A polling of the chamber's members as of March 6 showed 93 percent of factories were operational. About 80-85 percent of workers have returned to work. Many companies are working overtime, and companies with offices in office buildings are implementing staggered shifts to manage the flow of people, according to the white paper.

While more US companies witnessed decline in revenues from China than their counterparts, their profitability remained better than the others.

Favored destination

Despite all problems, China remains one of the top three investment destinations in the world among more than half of the studied companies. Willingness to reinvest in China remains strong, Seyedin said.

The American Chamber of Commerce in South China conducted a study of 237 random companies from March 9 to 14.Multinational companies made up nearly half of the companies in the study and manufacturers represented 76 percent of the total.

Nearly one-third of the companies in the study were facing a shortage of components, supplies or materials, with 15 percent reporting they had ran out of components, supplies or materials, according to the chamber's special report, released on March 18, on the impact of COVID-19 on supply chains.

And 80 percent of companies believed the problems will last between one and three months. All respondents were experiencing some impact on their operations due to disruptions in supply chains.