According to official data, the number of employees in foreign companies in China dropped below 10 million in 2023, hitting a new low in 14 years and decreasing by more than 30 million from its peak.
The 2024 China Statistical Yearbook released by the National Bureau of Statistics of China showed that the number of employees in foreign companies dropped by 15% in 2023 to 9.88 million, marking the largest decline since the data was first released in 1990 and the first time it fell below 10 million since 2009.
Foreign companies have played a significant role in China’s economy, employing approximately 40 million people and contributing to about one-sixth of the country’s tax revenue and two-fifths of its import and export activities, according to Chinese Minister of Commerce Wang Wentao in a press conference in August 2021.
It is important to note that the 40 million people are the direct employees of foreign companies, and these companies also indirectly create a significant number of job opportunities through their supply chains.
The decline in the number of employees in foreign companies by 30 million indicates that 30 million people have returned home due to unemployment.
In the first three quarters of this year, China’s actual use of foreign direct investment (FDI) was 640.6 billion yuan, a 30.4% decrease compared to the same period last year, according to data from the Chinese State Administration of Foreign Exchange.
If the current downward trend continues for the remainder of the year, it would mark the first annual net outflow of FDI since at least 1990, as reported by Bloomberg.
Japanese companies used to provide a significant number of job opportunities for the Chinese people, but now many are either withdrawing or reducing their investments in China.
The trend of Japanese companies exiting China can be seen as several big Japanese automotive companies, including Panasonic Holdings, Nissan, Toyota, and Honda, reducing their workforce in China to around 40,000 employees each, based on public Chinese corporate registration information from March 2023.
Among the top 20 Japanese companies in China, nearly 460,000 employees were employed. Additionally, major Japanese-linked retail and restaurant chains also offered numerous job positions in China.
However, the situation has changed, with more and more Japanese companies withdrawing or reducing their investments in China.
Furthermore, Taiwanese companies have also begun to withdraw from China. A report from the Center for Strategic and International Studies (CSIS) in the United States in September this year showed that 57.4% of Taiwanese companies are currently considering or are in the process of withdrawing from mainland China.
The top three reasons cited for Taiwanese companies withdrawing from China are high labor costs, the possibility of supply chain disruption, and changes in investment policies.
An article titled “Mass Exodus of Foreign Companies” by “Guangyan Financial” noted that China is no longer a promising destination for international investment but has become a quagmire, and it’s better to leave early.
The article mentioned that the decision of foreign companies to partially or completely exit the Chinese market has become a major trend rather than isolated occurrences, driven by various economic, political, and social factors.
One of the key reasons for the exodus of foreign companies is the slowdown in China’s economic growth. China’s GDP growth slowed from 10.6% in 2010 to about 5.2% in 2023. At the same time, the overall operating costs in China, including labor costs, land costs, and environmental costs, have been steadily increasing. According to the latest data, the average annual salary of the manufacturing industry in China reached 97,379 yuan in 2021, more than double that of 2010.
Another critical factor contributing to the departure of foreign investment is the escalating geopolitical tensions. The ongoing US-China trade war and unstable relations between China and Europe have made the operating environment for foreign companies in China more complex and uncertain.
Moreover, countries like the United States have imposed strict scrutiny on American companies investing in China for national security reasons, limiting American capital inflow into China.
According to data from the Chinese Ministry of Commerce and Bureau of Industry and Commerce cited by “Guangyan Financial,” around 1,000 foreign companies completely withdrew from the Chinese market between 2015 and 2020.
Major high-tech foreign companies such as Oracle, Micron, Qualcomm, Citrix, Microsoft, and IBM have recently withdrawn from China. The article also listed several multinational companies that have downsized or exited their Chinese operations in recent years.
For example, in October 2024, Fidelity International plans to cut about 500 jobs in its China branch.
In September 2024, Cisco cut 300 employees in its Dalian factory, marking the second round of layoffs this year.
In August 2024, IBM closed its research and development department in China.
In May 2024, Microsoft withdrew from its AI team in China.
In April 2024, Amazon’s cloud computing department in China laid off hundreds of positions.
In December 2023, Trend Micro relocated its research center from China.
In November 2023, Citrix discontinued its operations in the Chinese market.
In November 2023, Texas Instruments completely withdrew its MCU team from China!
In October 2023, Nvidia announced its exit from the Chinese market.
In September 2023, Qualcomm carried out a large-scale workforce reduction in China.
In August 2023, LinkedIn officially discontinued its local job-seeking platform “LinkedIn Workplace” in China.
In early 2023, Nutanix exited the Chinese market.
Adobe banned all mainland Chinese accounts on its designer website Behance in 2023.
In August 2022, Salesforce, the largest customer relationship management provider in the United States, dissolved its operations in China.
In January 2022, Micron’s Shanghai R&D center was dissolved.
Additionally, multinational manufacturing companies that have downsized or withdrawn their operations from China in 2024 were also listed:
– Volkswagen from Germany planned to close its joint venture Nanjing factory with SAIC next year, where Volkswagen Passat and Skoda are mainly produced.
– Toyota announced on September 13, 2024, that its subsidiary, Hino Motors, will stop producing diesel engines in China.
– Honda’s second joint venture factory in Wuhan shut down at the end of August, laying off 2,500 employees.
– Liebherr from Switzerland announced the closure of its concrete factory in Xuzhou in early August.
– Japanese Konica Minolta announced in August that its factory in Wuxi will cease production next year, affecting over 1,300 employees.
– Nippon Steel Corporation announced in July its withdrawal from the joint venture with Baosteel in Shanghai – Baosteel Nippon Steel Automotive Plates Co., Ltd.
– Kato Works Co., Ltd. official withdrew from the Chinese market on July 12, closing its joint venture factory in Kunshan City.
– Nissan Motor announced the closure of its production factory in Changzhou in June.
– Taiwan’s panel giant, Chimei Group, was reported to have closed its Nanjing factory in April, dissolving 2,400 employees.
– Dell announced a 50% reduction in personnel at its Xiamen factory in April.
– Bridgestone Corporation officially closed its production factory in Shenyang on February 29, laying off over 1,200 employees.
Moreover, Japanese enterprises that withdrew or downsized their operations in China between 2020 and 2023 include Mitsubishi, Sony, Canon, and Toshiba. European companies like Philips, Carrefour, and TESCO have also made similar moves, along with American companies such as HP, Apple, Yahoo, Amazon, and Old Navy, as well as Korean companies like Samsung and Lotte.