12-18 November 2023
Weekly newsletter tracking high-level policy signals sent by China’s top leaders. For more information, visit About Five Things.
Commentary
Three of last week’s five most widely circulated articles in China’s official media were about Xi Jinping’s trip to the US for this year’s APEC leaders’ meeting.
His meeting with Biden has been extensively chewed over in the media, as was his dinner with various US CEOs and the nature of their friendly reception of China’s top leader.
By coincidence, last week the US’s Bureau of Economic Analysis released its summary of the overseas economic activities of US multinationals for 2021 (here).
According to this data, the number of US MNC affiliates in China with assets, sales or net income greater than $25 million was 1,956.
Between them, these entities had sales of US$472 billion and net income of $41 billion – accounting for 6.4% of their total sales outside the US and 3.2% of their total net income outside the US.
To give these numbers some context, they are a faction of those in the region which matters most for US multinationals – Europe – with 47% of global sales and 60% of net income.
Moreover, despite all the foreign direct investment which has flowed into China over the last four decades, the country only accounts for 1.8% of US MNCs’ global assets.
Where these businesses are successful, however, is in average sales. Globally, average sales per MNC affiliate was $194 million; in Europe it was $185 million; in China it was $241 million.
They also spent disproportionately more on R&D, with their China spend accounting for 8% of the global total.
And they hired disproportionately more staff, with the 1.2 million people employed by them accounting for nearly 9% of the global total.
Of course, these numbers don’t many things into account, such as the many people working indirectly for US firms through contract businesses such as Foxconn, but the aggregate picture they offer is worth noting.
We know that some companies have excellent sales there, notably American semiconductor firms. Yet in their cases it is because most of their products end up in goods for export.
More generally, while China is a significant market for many US multinationals, on average it is very far from the most important. Even for some of the most successful companies there, such as Apple, it clearly remains of more importance as a production location than for sales.
With foreign direct investment into China dropping sharply this year (indeed, turning negative on balance in the third quarter), that also could be changing.
However, as the Bureau of Economic Research’s data also shows (see table), after barely budging for the five years after 2015, sales by US MNCs jumped sharply in 2021 – up 30%.
Clearly, foreign business and its possible contribution to the Chinese economy is one thing on the minds of China’s leaders, hence Xi’s dinner in San Francisco. A lot could turn on whether these sales keep rising or whether – as seems likely to 2022 and 2023 – they slow, halt or reverse.
Top-ranked articles for 12-18 November 2023
% = percentage of publications monitored carrying the article
1. Xi Jinping attends, delivers speech at joint welcome banquet hosted by US friendship groups
习近平出席美国友好团体联合欢迎宴会并发表演讲
Xinhua News Agency, 15 November 2023
Chinese / Machine translation / 51%
2. Xi Jinping holds first meeting between Chinese and US heads of state with President Biden
习近平同美国总统拜登举行中美元首会晤
Xinhua News Agency, 15 November 2023
Chinese / Machine translation / 49%
3. “Qiushi” magazine publishes important article by General Secretary Xi Jinping: “Handling Several Major Relationships in Promoting Ecological Civilization Construction”
《求是》杂志发表习近平总书记重要文章《推进生态文明建设需要处理好几个重大关系》
Xinhua News Agency, 15 November 2023
Chinese / Machine translation / 41%
4. Constantly worrying and caring: A record of General Secretary Xi Jinping’s inspection of post-disaster recovery and reconstruction work in Beijing and Hebei
时时放心不下的牵挂——记习近平总书记在北京河北考察灾后恢复重建工作
Xinhua News Agency, 12 November 2023
Chinese / Machine translation / 39%
5. Xi Jinping delivers written speech to APEC CEO Summit
习近平向亚太经合组织工商领导人峰会发表书面演讲
Xinhua News Agency, 16 November 2023
Chinese / Machine translation / 37%
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