China attracts foreign investors with its strong magnetism

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]

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]

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.