(Yicai) Nov. 9 -- With its diversified industrial base and market strengths, China is evolving into a critical hub where global enterprises deploy core competencies, according to the latest report by PricewaterhouseCoopers.

Cross-border corporate investment is no longer driven purely by cost considerations and scale expansion, but it is now centered on whether businesses can build transferable, reusable foundational capabilities, PwC said in the report released at the Ninth China International Import Expo in Shanghai yesterday.

Companies are reassessing their cross-border investment strategies, said Hemione Hudson, chairwoman and chief executive officer of PwC China. Their focus has shifted away from capital flows, short-term returns, and sheer scale growth and moved toward building capabilities for cross-market innovation, operational optimization, and sustainable growth, she added.

Two-way investment flows signal that China is no longer merely a manufacturing base on the global business map, but it is a place where new approaches can be developed, validated, and scaled up, Hudson noted.

While uncertainty persists over investment outlooks, most surveyed multinational companies plan to maintain or ramp up investment in China, according to another report released at the CIIE by Klynveld Peat Marwick Goerdeler. Key motivations include sustaining competitiveness in the Chinese market, strengthening local research and development capacity, and expanding production capacity.

Corporate strategic priorities are shifting from growth-at-all-costs toward profitability, as more than half of survey respondents ranked profitability above revenue growth, the KPMG report showed. Firms are protecting profit margins and improving operational efficiency through restructuring, leaner supply chains, and artificial intelligence-enabled productivity gains.

Even as AI adoption deepens, its value at this stage lies largely in cutting costs and boosting efficiency, with a relatively limited direct impact on driving revenue, KPMG believes. Its report points to diverse AI deployment pathways. Multinationals may opt for local technology stacks, global stacks, or hybrid setups, with marked differences in technology preferences among companies from different regions.

“Over the next three to five years, multinationals operating in China will need to pursue deep localization, rebuild competitiveness, and seize opportunities to serve global markets from their China foothold,” said Liu Xiaoguang, lead partner of KPMG China’s AI Transformation Office.

Multinationals recognize opportunities stemming from China’s vast domestic demand, robust industrial support networks, and vibrant innovation ecosystem, but intensifying local competition is pushing them to be more selective with capital allocation, prioritize operational efficiency, and focus on profit quality, Liu noted.

Editor: Futura Costaglione