Policy Watch: New Stimulus Benefits Foreign Products made in China?

Originally reported by Bloomberg, China is now considering further stimulus to accelerate driving up domestic demand in anticipation of U.S. President-elect Donald Trump taking over the White House in five weeks.

One signature change is the shift from the previous focus on maintaining stability to more quantitative easing, to ramp up domestic demand. Can foreign enterprises benefit from the domestic demand-driven policy?

One of the recent guidance from the Ministry of Finance offers some clues. Last month, the Finance Ministry of China released a draft guidance on government procurement of domestically produced products.

For foreign-owned enterprises, not only must their products be assembled inside China, but they must have key components made locally in China to qualify as Made in China products.

That poses challenges to many multinational drug makers having their key products manufactured outside China. Most innovative new drugs marketed by the MNCs are exported to China, including key vaccine products and immune-oncology biologics. Many of them are manufactured outside China in countries like Ireland among others.

Meanwhile, the Finance Ministry also said in the draft guidance that foreign enterprises and Chinese domestic companies to be treated equally in the government-procurement process.

China is reportedly considering a new stimulus to boost domestic demand as the country anticipates the incoming U.S. President-elect Donald Trump taking office in a few weeks. Unlike past strategies that focused on stability, the new approach involves quantitative easing aimed at ramping up consumption and demand within China.

But does this shift present an opportunity for foreign companies? Recently, the Ministry of Finance in China released draft guidance on government procurement, and it seems that there may be a policy shift benefiting foreign products, but with strings attached.

For foreign-owned enterprises, there is now a requirement for products to be assembled inside China and to have key components made locally in order to be considered "Made in China." This poses a challenge for multinational companies that manufacture their products, especially high-end pharmaceuticals like vaccines and immune-oncology biologics, outside of China, in places like Ireland and other countries.

The guidance also indicates that foreign enterprises and Chinese domestic companies will be treated equally during the government procurement process, allowing foreign companies to compete for contracts. However, this move is part of a larger effort, and foreign trade groups have expressed that there is still work to be done before foreign companies see a truly level playing field in China.

In conclusion, while the new policy signals potential opportunities for foreign enterprises, it also creates significant hurdles for companies that rely on manufacturing outside of China. The guidelines highlight the complexities of navigating China's evolving economic policies, especially in the face of growing calls for fairness and equal treatment in procurement.