China attracts foreign investors with its strong magnetism

China Plus Published: 2019-09-10 22:26:12
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Note: The following article is taken from the Chinese-language "Commentaries on International Affairs."

The 2019 China International Fair for Investment & Trade is underway in the city of Xiamen in the country’s southeast. Nearly 130 countries and regions are taking part, including world-renowned multinational companies such as Coca-Cola, DuPont, and Schneider. Alongside the international trade fair is an agricultural products trade show that’s part of the Belt and Road Initiative, where foreign investment contracts have been signed worth 29.5 billion U.S. dollars. Both these events are taking place against the backdrop of a three-year slowdown in global foreign direct investment. But as the 2019 World Investment Report released by the United Nations Conference on Trade and Development during the trade fair in Xiamen shows, the amount of foreign capital flowing to China in 2018 has bucked the downward trend, once again proving that China remains a bright spot for international investment.

The 2019 China International Fair for Investment & Trade (CIFIT) opens in Xiamen, southeast China's Fujian Province, on September 8th, 2019. [Photo: VCG]

The 2019 China International Fair for Investment & Trade (CIFIT) opens in Xiamen, southeast China's Fujian Province, on September 8th, 2019. [Photo: VCG]

According to the report, global foreign direct investment was down 13 percent in 2018 compared to 2017. But at the same time, investment in China reached a record high, with inflows rising by 4 percent to 139 billion U.S. dollars – more than 10 percent of the global total. China continues to be the second-largest destination for foreign capital inflows, and the report predicts that capital inflows this year will continue to drive higher-quality development and that the country will remain a magnet for global investment.

There are several reasons why China remains a magnet for foreign investment. It has a population of nearly 1.4 billion people, which provides a huge skilled workforce. It also means there is a massive market for the world’s goods and services, especially among the more than 400 million people in the middle-income bracket with their constantly rising consumer demands. For multinational companies, China can provide complete industrial and supply chains, which is why about half of Apple’s approximately 800 supplier factories are located in China. The country also has well-established infrastructure and logistics networks including ports, roads, and railways, which make it easy for multinational companies to link their suppliers with their factories, and to link their factories with their clients around the world.

Shanghai. [File Photo: VCG]

Shanghai. [File Photo: VCG]

The 2019 World Investment Report pointed out that 55 economies introduced about 112 investment policy measures last year, of which 34 percent were designed to restrict or regulate foreign investment, the highest rate of investment-restricting policies recorded since 2003. In the face of this external uncertainty, China's magnetism for global investors has been aided by the government’s determination to remain open to the outside world and to create a good business environment for foreign investment.

At a time when global foreign investment policy is tending to become increasingly tightened, especially in developed countries, the number of sectors in China closed to foreign investment has been further reduced, and laws and regulations concerning foreign investment have improved. The Shenzhen Demonstration Pilot Zone, the Shanghai Free Trade Zone’s Lingang New Area, and six new Free Trade Zones have been introduced, on top of 171 trade and economic reform measures introduced nationally. According to the World Investment Report, China has introduced a record number of measures to improve the business environment for small and medium-sized enterprises in the past year. These are just some of the reasons why the country’s actual use of foreign investment was up by 7.3 percent year-on-year in the first seven months of this year.

Although the trade frictions unilaterally provoked by the United States have brought uncertainty to the world economy and drastically reduced transnational capital flows, the multiple advantages of China’s business environment have made it impossible for foreign companies to ignore its potential, which is why China continues to be a popular destination for global investment.

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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, 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.