Rising foreign investment a vote of confidence in China's market

Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

China's Ministry of Commerce revealed on Thursday that the country's actual use of foreign capital in the first half of this year rose 7.2 percent year-on-year to reach 478 billion yuan (around 70 billion U.S. dollars). The growth rate is 40 basis points higher than that recorded for the first five months and 80 basis points higher than the figure for the first four months of this year. This accelerating growth shows that foreign investors are confident in China's market despite the backdrop of slowing global growth.

Apple's new Mac Pro on display at the Apple Worldwide Developers Conference in San Jose, California, on June 3, 2019. The Wall Street Journal has reported that the new Mac Pro will be built in China. [Photo: IC]

According to the ministry, foreign investment in the first half of this year had two notable characteristics. First, investment was moving into the middle and upper reaches of the value chain. Foreign capital utilized in China's high-tech industry increased by 44.3 percent compared to the same time last year, accounting for 28.8 percent of the total. Investment in high-tech manufacturing grew by 13.4 percent, and investment in the high-tech service industry increased by 71.1 percent. The second notable characteristics was the steady increase in investment from major source countries, including South Korea (up 63.8 percent), Japan (up 13.1 percent), Germany (up 81.3 percent), and the European Union (up 22.5 percent).

Foreign direct investment fell 13 percent globally in 2018 but recorded a 4 percent growth in China. The continued growth in the first half of this year once again shows how appealing the market is to international investors and provides more evidence for the resilience of China's economy. This resilience can be seen in the decision last month by the World Bank to keep its expectations for China's growth this year unchanged because it is capable of dealing with external challenges, while at the same time lowering its forecast for global growth.

As China goes through an economic restructure and industrial upgrade, its capacity for innovation is constantly improving. These conditions, taken together with the country's advantages in terms of the industrial supply chains it can offer, have encouraged foreign investors to deepen their position in China's market. The promises President Xi Jinping made at the G20 summit in Japan last month to speed up the country's opening, together with measures taken over the past couple of years to improve the country's business environment, have helped to reinforce the confidence of foreign investors. Multinationals including Tesla, Exxon Mobil, BASF, and LG are expanding their presence in China, and it has been widely reported that Apple is planning to move production of its new Mac Pro computer, the only major product Apple assembles in the United States, to China.

The data released by the Commerce Ministry this week is an affirmation of the strength of China's economy, and it should come as no surprise. China is shifting to a model of development that is increasingly reliant on high-quality growth, and foreign investors can see that this offers huge potential to the participants in China's market.