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Foreign firms enthusiastic about opening-up progress
2024-09-13 
Left: Jens Hildebrandt, Vice-president of government relations at BASF Greater China. Right: Jenny Zheng, Senior vice-president and general manager of Illumina Greater China.

Editor's Note: These interviews with CEOs of major foreign firms gauge their outlook for the Chinese economy, their operations in China and their business plans for 2024 and beyond, in the wake of the momentous resolution adopted at the third plenary session of the 20th Communist Party of China Central Committee in mid-July.

Q1

The third plenary session of the 20th Communist Party of China Central Committee in mid-July has rolled out the reform and opening-up roadmap for the Chinese economy in the coming years. What are your major takeaways from the plenum? What are the biggest opportunities you spot in China's new measures to deepen reform and further open up its economy? How do you plan to capitalize on these opportunities in your specific industry?

Hildebrandt: The plenum emphasized the importance of green development, which presents foreign and local companies with a multitude of opportunities, which range from the growth of emerging sectors like future transportation and renewable energy, to the revitalization of traditional sectors such as smart home appliances and energy-efficient buildings.

With an extensive portfolio of 45,000 products, BASF is well positioned to seize this opportunity and drive chemical innovation that will propel these industries toward a more sustainable future. To date, we have invested nearly 14 billion euros ($15.42 billion) in collaboration with our partners in China to establish a comprehensive local production and R&D network.

Additionally, as a front-runner in driving green transformation, BASF has developed a well-defined roadmap to achieve net-zero carbon emissions by 2050. This roadmap is in line with the green transformation of the chemical industry, as well as China's dual-carbon targets.

Zheng: At the third plenary session of the 20th CPC Central Committee held in mid-July, the concept of "developing new quality productive forces according to local conditions" emerged as an inherent requirement and a crucial focus for promoting high-quality development, offering clear direction and opportunities for the growth of Illumina in China.

Recognizing China's commitment to market-driven resource allocation, technological innovation, high-quality development, and the strengthening of intellectual property protections, Illumina is committed to further enhancing our localized manufacturing capabilities, and technological innovation, leading the synergistic growth of China's patent-intensive industries and propelling the high-quality development of the country's high-end scientific instrument industry chain, and facilitating China-based innovation integration into the global innovation system.

Q2

In your view, how will the reform and opening-up measures rolled out at the plenum help strengthen the Chinese economy and bolster its prospects of achieving modernization? Do you think China's new reform and opening-up blueprint will make fresh contributions to the global economy? If yes, how?

Hildebrandt: With a target economic growth rate of around 5 percent for 2024, China remains an important driver of global economic growth. In the chemical sector, the Chinese market stands as a crucial growth engine, accounting for half of the global chemical production and showing continued growth momentum.

The new quality productive forces, with a focus on high-tech development, innovation and sustainability, will likely enhance the vitality of the domestic market, and encourage collaboration across the value chain. However, pushing forward demand-side policies would be crucial to inducing much-needed consumer confidence. Building on this momentum, BASF is expanding its business presence in China to serve our customers with enhanced efficiency and proximity. Meanwhile, we are fostering collaboration along the value chain to facilitate our customers' sustainability journey and transform sustainable concepts into readily accessible products.

Zheng: The reform and opening-up measures introduced at the plenum are expected to fortify the Chinese economy by fostering a more efficient market system and encouraging innovation, which is essential for modernization. These measures, by enhancing market vitality and improving legal frameworks, including for intellectual property, will likely create a more conducive environment for both domestic and international businesses.

Illumina believes that China's new reform and opening-up blueprint can contribute to the world economy by providing a robust platform for deeper global collaboration. As China continues to open its markets and improve its business climate, it offers increased opportunities for trade and investment, encouraging the flow of capital, technology and expertise.

Q3

How do you view China's new reform initiatives aimed at fostering new quality productive forces, such as those to encourage industrial upgrade and technological innovation? Do you see these as opportunities or challenges for foreign enterprises, and why?

Hildebrandt: China's dynamic market, well-established industrial foundation, abundant talent pool, and inclusive atmosphere for embracing new technologies, collectively lay a solid foundation for innovation.

Innovation has always been the key to BASF's success. We are working together with our customers intensively on innovative products and processes for a sustainable future.

In China, 10 percent of our employees are engaged in research and development as we drive innovation to achieve sustainable chemical production and expand our portfolio of sustainable solutions. In addition, we actively foster collaboration with local institutes and partners throughout the value chain to build an innovation ecosystem.

Zheng: China's strategic initiatives, particularly those aimed at industrial upgrade and technological innovation, are seen as opportunities by foreign innovation-driven enterprises like Illumina. These reforms are designed to enhance the ecosystem for innovation and industry collaboration, which align with our commitment to advancing genomic sequencing technology and to improving human health.

In recent years, technological innovations in life sciences have driven the coordinated development of multiple areas such as "industry, academia, research, medicine, and transformation" in China, leading to the continuous emergence of new industries, business forms and models.

Illumina aims to enhance localization and long-term planning in China, and simultaneously unleash the social and economic benefits of new quality productive forces in genetic sequencing technology to support the high-quality development of national health.

Q4

While China is expanding opening-up, some are concerned that geopolitical tensions, rising protectionism and global supply chain adjustments may weaken China's attractiveness to foreign companies. What's your take? How important will China be for your global business in the coming decade? What more opening-up measures can China take to offset the impact of the complex external environment?

Hildebrandt: The Chinese market is of strategic significance to BASF. Our investments in China are in line with BASF's strategy of producing where our customers are and where there is market growth. BASF currently manufactures around 80 percent of its products sold in China locally. Additionally, we are constructing a new Verbund site in Zhanjiang, which will be our largest investment to date (approximately 10 billion euros upon completion). Moreover, BASF has invested 280 million euros in its innovation campus in Shanghai, serving as our largest R&D site in Asia.

As an energy intensive industry, the chemical sector is facing the challenge of green transformation. We strongly support the development and implementation of comprehensive and transparent standards for carbon management in China. Furthermore, we advocate for policies that promote the use of low-carbon technologies and products, thereby accelerating the advancement of sustainable solutions.

Zheng: Illumina continues to see China as a crucial part of our global strategy, due to its significant market potential and population, as well as the region's talent and scientific strengths. China's potential as a growth engine is undeniable, and we see it as more than just a market. It's a hub for innovation and scientific advancement. Our strategy is to deepen our integration into the Chinese market, shifting from a product-centric to a customer-centric approach, which means understanding and addressing the unique needs of our customers across various sectors and embedding our solutions deeper into their workflows.

Q5

The plenary session has stressed that reform tasks laid out at the meeting shall be completed by the time the People's Republic of China celebrates its 80th anniversary in 2029. How do you expect the new reform and opening-up measures to transform the Chinese economy in the coming five years? What strategies will your company adopt to align with the expected transformation? Looking ahead, in the second half of 2024, what are your expectations for the Chinese economy? How do you think your company will fare in this evolving landscape?

Hildebrandt: As the largest chemical market in the world, China is a strategic market and growth engine for BASF.

We have a firm belief in the market potential and future development of China and are encouraged by the country's shift toward a high-quality and sustainable growth model.

We will continue our efforts to enhance our local manufacturing and innovation capabilities, as well as drive green transformation across the value chain.

Zheng: Looking ahead to the next five years, we anticipate that the new reform and opening-up measures will significantly transform China's economy by fostering an environment that is more conducive to innovation, collaboration and high-quality development.

At Illumina, we see our role as integral to this vision. China's status as a major economic and scientific innovation powerhouse positions it to reap significant benefits from emerging life science technologies like genetic sequencing.

As we look forward to the second half, we are encouraged by the indicators pointing to China's economic resilience. We expect remarkable progress in continued growth and modernization, with an increasing focus on sectors like healthcare and biotechnology that are at the heart of the expertise of Illumina.

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