Nation will continue to be popular destination for foreign investment, Premier Li tells Musk

As the groundbreaking ceremony kicked off in Shanghai this week for Tesla Inc's first overseas gigafactory, the city's biggest-ever foreign investment in manufacturing at 50 billion yuan ($7.3 billion) turned into reality.

The factory will be the first solely owned by foreign capital in China's automaking industry after the country canceled the equity cap for foreign capital for new energy vehicles last year.

China has been and will continue to be a long-term, popular destination for foreign investment, and it welcomes enterprises from other countries to expand their cooperation and investment in the country, Premier Li Keqiang said on Jan 9 in Beijing while meeting with Elon Musk, CEO of Tesla.

The premier congratulated Tesla on the start of building its new plant in Shanghai. Li also said the US company is expected to further participate in China's reform and opening-up and contribute to the stable development of China-US relations.

Musk said he was impressed with China's rapid development and the efficiency that enabled Tesla to complete all procedures for opening an automaking factory in Shanghai. He added that Tesla will make the new factory one of the most advanced in the world, with products customized for the Chinese market for win-win outcomes.

The Tesla plant is among a number of foreign-invested projects under construction. These projects demonstrate that China is attractive to foreign investors as the country endeavors to open its door wider by expanding market access and improving the business environment.

The Tesla case also shows that the Chinese market is attractive to multinational companies, which are optimistic about the prospect of the Chinese market and are attentive to the new demands of the surging middle class, which had more than 400 million people last year, said Chen Fengying, a senior researcher of the world economy at the China Institutes of Contemporary International Relations.

In addition, China's efforts to reduce institutional costs, part of its reform and opening-up, can also help foreign investors to take a share of the huge market, Chen said.

Tesla will spend 16 billion yuan to complete the first phase of the factory and make 250,000 electric vehicles per year, with the ultimate production capacity doubling that number. By the end of this year, the new plant will start producing electric cars for Chinese and overseas consumers.

China, one of the largest markets worldwide for new energy vehicles, was Tesla's second-largest market last year, contributing $2 billion in revenue.

In the first 11 months last year, 1.03 million electric vehicles were sold in China, up by 68 percent compared with the same period in 2017, according to the China Association of Automobile Manufacturers.