Foreign investment in China this year expected to exceed RMB 1 trillion

2021-11-5 10:12:45

The Ministry of Commerce (MOFCOM) recently issued the 14th Five-Year Plan for Utilization of Foreign Investment (hereinafter referred to as the Plan). The Plan gives an outlook on the prospects for foreign investment utilization in 2035 and puts forward the main goals of foreign investment utilization during the 14th Five-Year Plan period, that is China ranks among the top globally in the scale of utilized foreign investment, the status of China as a major country in foreign investment utilization is consolidated, the structure of foreign capital utilization is continuously optimized, and the linkage among foreign investment, foreign trade, and consumption promotion is strengthened. The Plan also specifies 23 main tasks and specific measures in 7 aspects to guide foreign investment utilization in China.

Better utilize foreign investment to support the establishment of a new development pattern

Zong Changqing, Director General of the Department of Foreign Investment Administration of MOFCOM, said at a special press conference in the Plan and foreign investment stabilization that China will accelerate the establishment of a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other during the 14th Five-Year Plan period. As an important market entity in China, foreign-funded enterprises account for about 2% of the total number of enterprises in China, contribute 40% to the national foreign trade volume and one-sixth to the tax revenue, and directly or indirectly create 10% of the total jobs in cities and towns, making a significant contribution to building a moderately prosperous society in an all-round way in China. This Plan is aimed at guiding the foreign investment utilization in the new stage to better support the new development pattern.

“The Plan strengthens the regulation and guidance on China’s attraction and utilization of foreign investment.” said Chen Zhiheng, an assistant research fellow at the Chongyang Institute for Financial Studies, Renmin University of China, in an interview with China Trade News. The Plan specifies the role of foreign investment in promoting China’s economic development during the 14th Five-Year Plan period, and establishes the control on foreign investment as one of driving forces for economic development through setting up development goals and key tasks. The Plan comprehensively expounds economic development direction, measures and achievements promoted by foreign investment from the perspectives of openness level, structural optimization, institutional improvement, investment environment, and investment facilitation. Thus, this Plan is of greater practical significance.

Zhu Keli, Founding President and Chief Researcher of the China Institute of New Economy stressed the highlights in the Plan, such as lowering the thresholds in key areas, orderly opening up the businesses in the fields of telecommunications, Internet, education, culture, and medical care, relaxing the requirements in Foreign Investment Law and personnel qualifications, and opening up more businesses in transportation and other industries to foreign investment.

Optimize the structure of foreign investment to guide more foreign investment into the service industry

Zong Changqing said that from January to September this year, the actually utilized foreign investment increased 19.6% from last year to RMB 859.51 billion (USD 129.26 billion equivalent, a year-on-year increase of 25.2%), the first double-digit growth over the past 10 years. Considering the rapid growth of foreign investment in China for the first three quarters of this year, it is expected that foreign investment will increase steadily in 2021 to reach over RMB 1 trillion (USD 160 billion equivalent), realizing the goal of stabilizing foreign investment in China.

Chen Zhiheng listed three main factors favorable to China’s absorption of foreign investment. First, China is the first to recover form COVID-19 in the post-pandemic era and registers significant economic growth. The preliminary calculation shows that China’s GDP in the first three quarters increased by 9.8% year-on-year, and the average growth rate over the past two years was 5.2%. The service industry and manufacturing industry among others have been back on track, and foreign capital usually favors the stable economies as destination of investment. Second, China’s currency value is stable. China is implementing a prudent monetary policy targeted at supporting economic recovery with more flexibility and precision. Moreover, China’s current account surplus stays within a reasonable range, while the RMB exchange rate remains stable. These factors will facilitate a positive international expectation for China’s market stability, thereby promoting trade exchanges and international investment between China and other countries. Third, such large-scale economic and trade events as China International Fair for Trade in Services and China International Import Expo have seen increasing international influence.

According to the expected quantitative indicators listed in the Plan, China’s actually utilized foreign investment will reach USD 700 billion in accumulative terms by 2025. Meng Huating, Deputy Director General of the Foreign Investment Administration of MOFCOM, said that a priority for foreign investment utilization during the 14th Five-Year Plan period is to continuously optimize the structure of foreign investment utilization and improve the quality of foreign investment utilization to better support high-quality business and economic development, while stabilizing the overall volume of foreign investment in China. The Plan not only takes “stabilizing the total volume and optimizing the structure” as a basic principle, but also puts forward the development goal of “further improving the structure of foreign capital utilization”, which includes “further optimize the structure of foreign investment in industries, high-tech industry, strategic emerging industries and modern service industry attract more foreign investment, distribute foreign investment more reasonably among different areas in China, and further improve the structure of foreign investors”.

The service industry has become a hot spot for foreign investment. The actually utilized foreign investment in the service industry for the first nine months this year was RMB 685.32 billion, up 22.5% year-on-year. Chen Zhiheng said that the Plan has expounded the role of the service industry in attracting foreign investment. For example, through the comprehensive pilot schemes for further opening up the service industry, China has established a multi-level and all-round open platform composed of Hainan Free Trade Port, free trade zones, and national economic and technological development zones. China will support Beijing, based on its strategic positioning as the “four centers” (the national political center, cultural center, center for international exchanges, and center for scientific discovery and technological innovation), to develop into a new demonstration area for further opening up the service industry that involves medical care, technology and logistics, as a new pillar for promoting the development of the service industry.

Optimize the business environment to strengthen the rule of law in foreign investment

Zong Changqing said that the recent survey by MOFCOM shows that among more than 3,000 key foreign-funded enterprises, 93.3% have optimistic expectations for their future development. Recent reports issued by foreign chambers of commerce in the United States, Europe, and Japan show that nearly two-thirds of US-funded enterprises, 59% of European-funded enterprises, and 36.6% of Japanese-funded enterprises plan to expand their investment in China.

Industry insiders said that as a more internationalized business environment by rule of law with greater facilitation is put in place, market entities, including multinational enterprises, have stable expectations for China’s development. Yang Xu, Intel Vice-President and President of Intel China, said that Intel’s confidence in China is further enhanced by the well-developed infrastructure, complete industrial chains, a large number of skilled industrial talents, the government’s strong support for innovation, and Chinese consumers’ enthusiasm for new technologies, new products, and new services.

There is no end to the improvement of business environment. With the continuous optimization of business environment demonstrated throughout the text, the Plan specifies that measures should be taken during the 14th Five-Year Plan period to deepen the reform of “delegating power, improving regulation, and upgrading services”, continue to strengthen the rule of law in foreign investment, enhance the protection of rights and interests of foreign investors in accordance with law, and consolidate the status of competition policies as the foundation, in an effort to promote fair competition between domestic and foreign enterprises.

Chen Zhiheng told China Trade News that with the high-quality development of the Belt and Road Initiative and the implementation of the Regional Comprehensive Economic Partnership, investors have new expectations for free flow of capital and new requirements for investment facilitation in regional cooperation and economic and trade exchanges. He believes that the foreign investment environment can be further improved in the following three aspects: First, Foreign Investment Law shall be well implemented to ensure that specific measures to stabilize foreign investment are implemented; second, the areas where foreign investment is allowed shall be expanded to promote the in-depth development of the capital market, strengthen the resilience of supply chains and industrial chains, and find more industry growth points; and third, a partnership among more regulatory agencies shall be established to facilitate joint forces among all parties and release of more policies favorable to the stable development of economy and trade, so as to guard the sound socio-economic development and investment environment.

Zong Changqing said that the enhanced opening up, optimized business environment, complete industry system, well-developed infrastructure and outstanding market advantages during the 14th Five-Year Plan period will make China a place favored by foreign investment for a long term.

(Source: CCPIT/

Our Leadership

Zhang Yongming Chairman ...

History and Growth

Promoting international trade, promoting utilization of foreign investment, prom...

About the CCPIT Beijing

CCPIT Beijing, a foreign economic and trade organization composed of representat...