Why China remains a magnet for foreign investment

China Plus Published: 2019-02-12 20:55:14
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Note: The following is an edited translation of a commentary from the Chinese-language "Commentaries on International Affairs."

China was something of a shining light in what was a fairly dark year for the world's economic performance. Against the backdrop of a nearly 20 percent slump in global cross-border investment, new data from China's Commerce Ministry shows that more than 60,000 foreign-funded enterprises were established in the country last year, an annual increase of nearly 70 percent. The actual use of foreign capital was up 3 percent to hit a new high of 135 billion U.S. dollars. And the proportion of foreign investment in China's manufacturing sector increased to nearly one-third, while capital utilized by the high-tech manufacturing sector surged by 35 percent.

China's actual use of foreign capital hit a new high of 135 billion U.S. dollars in 2018 despite a nearly 20 percent slump in global cross-border investment. [Photo: VCG]

China's actual use of foreign capital hit a new high of 135 billion U.S. dollars in 2018 despite a nearly 20 percent slump in global cross-border investment. [Photo: VCG]

During the year, Tesla broke ground in Shanghai for its first Gigafactory outside the United States. BMW announced new investment of more than three billion euros to expand its production capacity on the Chinese mainland. And BP outlined its plan to open 1,000 more gas stations in China – double its existing number.

The confidence of global multinationals in China's market was given a substantial boost after the government announced a range of measures to make the country a more attractive target for investment. These measures included removing foreign-ownership limits for industries including ship and aircraft manufacturing, laying out a timetable for the opening of the domestic auto industry, and fully opening up its general manufacturing sector to foreign investors.

In the meantime, the government has been introducing policies that favor investment in central, western, and northeastern China, which are relatively under-developed compared with the country's eastern seaboard. It is also facilitating transfers of industrial capacity from eastern China into those areas. The result of these efforts has been a more than 15 percent increase in the actual use of foreign capital in central and western China.

Investment into China from developed countries has grown fast, with Britain leading the way. And despite the rising trade frictions, investment from the United States increased by nearly 8 percent. Investors have benefited from China fulfilling its commitment to significantly broaden market access, create a more attractive investment environment, strengthen the protection of intellectual property rights, and take the initiative to expand imports.

Looking around the world, it's hard to find another market quite like China's. Its consumer market has huge potential for growth, and as a supplier it can furnish incoming investors with all of the hardware and software technology they need. But despite last year's successes, there is more to be done. The government plans to introduce new measures to make government procurement more competitive, and it will continue to set industry standards and streamline company registrations and public listings. With all of these new initiatives in the works, it's fair to say that China will continue to be a magnet for foreign capital inflow in the year ahead.

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of chinaandgreece.com, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.