In the long history of over 40 years since China’s reform and opening up, foreign enterprises have deeply penetrated various sectors in China. Starting from small foreign trade sales points with just one or two individuals, they have evolved into setting up factories, Asia-Pacific headquarters, and now even establishing research and development centers in China. The development strategy has shifted to “in China for China” and “in China for global,” with Chinese factories supplying products globally, truly earning the title of the “world’s factory.” Currently, there are over 2,800 foreign enterprises with headquarters and research centers in China. Foreign enterprises account for about 3% of the total number of enterprises in China, contributing around 20% of tax revenue and 25% of industrial output value, playing an extremely important role in China’s economic development.
The development of China’s private industry can be divided into two paths: one involves entrepreneurial teams separated from state-owned enterprises, and the other involves entrepreneurial teams separated from foreign enterprises.
In the 1980s, there was a group of leaders from state-owned enterprises who, either out of a passion for technology or seeing domestic development opportunities, voluntarily left state-owned enterprises to start their own businesses. They were the first bold entrepreneurs in China, some filling the gaps in industry products in the 1980s, while others started as ODMs for foreign brands and eventually developed their own brands. Today, some of these enterprises have gone global, such as Wolong Electric in the motor industry and Jiei in the gearbox industry, both becoming global companies.
After 2000, the first wave of entrepreneurs from foreign enterprises began to emerge gradually. They had early exposure to imported products and saw significant business opportunities. Some entered niche markets that foreign enterprises were reluctant to enter, while others engaged in ODM or provided support for imported products.
Both types of enterprises have distinct regional characteristics. One group is concentrated in the Jiangsu, Zhejiang, and Shanghai regions due to their proximity to Shanghai, where the market and technology are relatively advanced. This has given rise to the concept of “weekend engineers,” with many engineers from Shanghai providing technical guidance to nearby enterprises on weekends. The other group is concentrated in the coastal areas of Shandong, closer to Japan and South Korea, making it easier to access Japanese and Korean technologies. These regions are also the most economically developed in China.
As China’s private enterprises develop, foreign enterprises face increasing competition. They have gradually shifted their Asia-Pacific centers from Hong Kong and Singapore to first-tier cities like Beijing and Shanghai, and have also established research and development centers in China to respond to market challenges. Many Chinese products can now replace imported brands. A clear trend is that China’s top talents are slowly leaving foreign enterprises to join internationalized private enterprises, a natural result of the talent aspirations in the development process of private enterprises. Through the flow of talent, the corporate culture, management practices, and technologies of foreign enterprises are also taking root and flourishing in private enterprises.
In summary, in the initial stages of China’s industrial development, foreign enterprises provided financial and technological support, nurtured a large number of industrial talents, ranging from technical to sales engineers and senior management personnel. Currently, China’s mid-to-low-end products can almost entirely meet domestic demand, with only a few high-end products still reliant on exports. With the increase in production capacity, Chinese enterprises are gradually venturing overseas to seek new markets, similar to how European, American, Japanese, and Korean enterprises came to China many years ago. The difference is that Chinese products offer extremely high cost performance and have relatively lower brand premiums.