China still a hot spot for foreign investment

In the face of a weakened global economic outlook, China is seeing steady growth in foreign investment, with a record-high actual use volume last year and an ongoing upward momentum.

The United Nations Conference on Trade and Development revealed along-term descent in global total cross-border direct investment, which fell from $1.9 trillion in 2015 to $1.3 trillion in 2018.

In contrast, China, the second-largest recipient of foreign investment in the world, remains a hot spot with multiple advantages. In the first half of 2019, the actually utilized foreign investment in China amounted to 478.33 billion yuan, a 7.2 percent year-on-year gain.

Shanghai embraced 38 foreign investment projects equivalent to 50 billion yuan by the end of May; a $10 billion integrated production base will stand in South China’s Guangdong province, the biggest global investment project of the German chemical tycoon BASF; and in Northeast China’s Liaoning province, 7,693 enterprises from Japan and the Republic of Korea have taken root in Dalian city.

Professor Sang Baichuan from the University of International Business and Economics said one can observe through the contrast how well China performed in this regard.

The quality and structure of foreign investment in China also have continued to be optimized, especially with high-quality foreign investment concentrated in sectors such as hi-tech manufacturing and service industries. For example, in the first half of 2019, the actually utilized foreign investment in electronic and communication device manufacturing gained 25 percent year-on-year, and research and design services added 77.7 percent.

Foreign investment utilized in the western area was 21.2 percent higher than last year in the first half of 2019, a progress bridging the regional development gap. Meanwhile, pilot free trade zones are also attracting 20.1 percent more as pioneers of national development.

Moreover, the ever-growing investors were from various countries. The Republic of Korea, Singapore, Japan and Germany expanded their investment in China this year, as did the European Union, ASEAN members, and countries along the Belt and Road.

In the fierce international competition of attracting investment, China took a range of effective measures such as reducing fees, cutting taxes and adopting the negative list mode, creating a favorable business environment for foreign investment and raising foreign investor confidence.

Ryan McDaniel, supply chain SVP of Walmart China, said the 2019 Catalogue of Encouraged Industries for Foreign Investment issued by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) assured them, and the retailer will increase investment in its supply chain logistics in China by about 8 billion yuan in the coming decade.

As for the impact of unilateralism and protectionism, senior researcher Zhang Yansheng at the China Center for International Economic Exchanges said it’s under control.

Some labor-intensive enterprises engaged in the export business are relocating from China to other countries, concerned by higher production costs caused by more tariffs. Such a phenomenon should be taken objectively without worries, Zhang said.

Industrial infrastructure, economic development environment, and other factors also matter for foreign enterprises. Those who opted to leave China merely to shun unilateralism and protectionism took a tiny proportion, Zhang said.

China’s all-around industrial system, promising industry size, and high talent with relatively lower costs, are favored by foreign investment, said Xing Houyuan, deputy director of the service outsourcing research center at MOFCOM.

The upgrading Chinese market, with over 400 million middle-income population and growing demand for high-quality products, is a magnet for foreign investment. Over 80 percent of US companies are optimistic about their prospects in China in the next five years, according to a recent survey by the American Chamber of Commerce in Shanghai.