New Foxconn deal shows how Chinese provinces are stepping up to entice overseas firms

In the latest bid by local governments across China to retain overseas businesses, authorities in Henan province have humbly appealed to Foxconn, urging the electronics manufacturer to maintain its investment confidence in the region.

The exhortation comes amid a growing trend of supply chains shifting away from China, while the world’s second-largest economy is also grappling with weak investor confidence both at home and abroad amid geopolitical risks and limited growth prospects.

“[I] hope that Foxconn will remain confident in its investment in the region, focusing on the cultivation of new industries and the development of new technologies … Together, we will build a high-end manufacturing industrial chain and an ecosystem for strategic emerging industries,” Henan governor Wang Kai said on Tuesday.

He also vowed to establish a regular communication mechanism and to strengthen comprehensive service guarantees to create a better environment for the development of Taiwanese enterprises in Henan.

Home to the world’s largest iPhone factory in Zhengzhou, Henan has faced pressure since Apple intensified its diversification efforts last year. This shift followed production challenges in late 2022, when a worker exodus due to coronavirus fears and subsequent violent protests over employee allowances disrupted Foxconn’s operations.

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With geopolitical risks and unexpected supply-chain disruptions heightening diversification efforts, the company has expanded its manufacturing supply chain into markets such as Vietnam and India.

According to data released by Zhengzhou customs authorities, Henan’s smartphone exports totalled 13.95 million units in the first half of the year, down nearly 50 per cent compared with the same period last year.

According to the agreement, Foxconn will invest 1 billion yuan (US$139 billion) in Zhengzhou to build a new headquarters, including research and strategic industry development centres.

Foxconn will accelerate the implementation of projects including electric vehicle manufacturing, batteries, digital healthcare, and robotics industrial bases.

The trend of diversification has intensified China’s waning appeal as an investment destination, thanks to the increasingly opaque policy environment as well as slow economic growth.

The recently concluded third plenum failed to inspire much confidence, as it lacked specific measures to improve the business climate despite Beijing’s repeated pledges of support.

In the first six months, domestic fixed-asset investments grew by 3.9 per cent, year on year.

Earlier this month, the mayor of Wuhan city in central China’s Hubei province also vowed support and policy facilitation for investors.

“We will continue to create a first-class business environment, deepen reforms for efficient task completion, and promote immediate project commencement upon land acquisition,” mayor Sheng Yuechun said during an investment promotion event.

“We are dedicated to being top-notch ‘servers’, providing comprehensive, high-quality services for your investment, business and life in Wuhan.”