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Still More New Options for Foreign Investment in China

2020-8-24 9:39:31

The Information Office of the State Council has recently held a policy briefing on the Opinions on Further Stabilizing Foreign Trade and Investment. Zong Changqing, Director General of the Department of Foreign Investment Administration of the Ministry of Commerce (MOFCOM), when taking questions from the press, said that since the beginning of this year, China has seen its amount of FDI turning from negative into positive growth, which is generally better than expected.

According to statistics, from January to July, 2020, national actual use of FDI totaled RMB 535.65 billion, up 0.5% year-on-year (excluding banking, securities and insurance, the same below), a 1.8% uptick from the January-to-June period, turning into a positive growth from negative; July saw FDI in actual use reach RMB 63.47 billion, up 15.8% year-on-year, a fourth monthly increase in a row.

As Zong mentioned, this year’s national FDI presented three characteristics. First, the service industry has played a fundamental role. From January to July, services registered RMB 414.59 billion in actual use of FDI, up 11.6% year-on-year and accounting for 77.4% of China’s total FDI. In particular, hi-tech services were up by 27.4% year-on-year. Second, sources of investment largely remain stable. The investment from Hong Kong, Singapore and the UK increased respectively by 8.2%, 4.6% and 48.6% year-on-year in paid-in FDI. Third, major projects with foreign investment continue to get implemented. Projects with over USD 100 million FDI account for 68% of the total. Multinational companies such as ExxonMobil, BMW, Toyota and Invista continue to increase their investment in China to accelerate their domestic expansion.

Zong pointed out that better-than-expected performances have been delivered so far this year in stabilizing foreign investment. There are four main reasons for the result. First, it attributes to the great attention given by the CPC Central Committee and the State Council which take the stability in foreign investment as a pivotal element in the principles of “ensuring stability in six areas” and “ensuring security in six areas”. President Xi Jinping, in particular, clearly put forward the new requirements of “keeping foreign trade and investment stable” amid the coordinated efforts to prevent and control the epidemic, and promote economic and social development, guiding the directions for stabilizing foreign investment and forming the synergy among top-to-bottom government bodies. Second, it benefits from China’s emphasis laid on foreign investment policies in response to COVID-19. As part of efforts to help companies out and further greater opening up, the State Council has twice reviewed and introduced new policies on stabilizing foreign investment at the executive meetings and also rolled out the two revised negative lists for the piloted free trade zones and for the rest of the country, followed by a series of measures taken by the Ministry of Commerce and relevant departments to stabilize foreign investment, all of which have effectively helped hedge against the adverse effects of the pandemic. The third reason lies in China’s greater support for foreign-funded enterprises. A foreign trade and investment coordination mechanism has been established with special taskforce formed aiming to provide "one-to-one" services for key foreign investment projects. Fourth, the improvement of the business environment also helps. The Foreign Investment Law of the People's Republic of China and its supporting regulations formally came into effect this year, in which the set-up or the change of foreign-funded enterprises in the commercial sector are no longer required to go through the approval and record procedure. Instead a reporting system is adopted, creating a freer and more convenient environment for foreign investment and therefore, leading to better outlook and more confidence in foreign investment.

In this regard, Liu Yingkui, Director of the International Investment Research Department of the Academy of China Council for the Promotion of International Trade, said that as China's economy continues to grow in recent years, there are always ungrounded voices that vainly attempt to slander China. However, facts have repeatedly proved that China is not affected by this, and the use of FDI has maintained a steady momentum. Liu further commented that ever since the outbreak of COVID-19, multiple authoritative international institutions have forecasted a possible 40% drop in global capital flows this year. In this context, it is not easy for China to continue to maintain the momentum of growth in attracting and using FDl.

Liu told the press that the security, return, and development sustainability of investment are important factors to be considered for international capital flows. As the unabated pandemic continues to invade the world, China has managed to take the lead in effectively controlling the spread of the virus with solid measures in place, which has instilled confidence for foreign investment in China. In recent years, China has been unremittingly deepening its opening-up and actively introducing new measures to explore untapped markets. In 2020, the central and local governments have introduced a range of measures and policies to stabilize foreign investment which create new development opportunities for FDI in China. Meanwhile, the transformation and upgrading of domestic industries has not only provided a source of impetus for China's economic growth, but also brought new options for foreign investment. Furthermore, China has strived for coordinated development among various regions in the country over the years by introducing a number of regional policies; China aims to better serve the enterprises by vigorously improving the business environment and as a result, the regional boundaries for foreign investment in China are gradually being removed, with wider geographical areas ready to be invested.

“In addition, China is one of the most important economies in the world with tremendous potential for economic growth. Despite the rising low-end labor costs, China boasts evident advantages in terms of the number, growth rate and the cost of high-skilled workers. With all these moves factored in, China is still a favored place for foreign investment and it makes great sense for foreign entities to invest in China.” Liu said.