Greater market access, equal treatment for Chinese and foreign businesses, negative list, eased restrictions on the equity ratio of foreign investors…China’s measures to expand its opening up have led to impressive results in the first seven months of 2019. Statistics from the Ministry of Commerce (MOFCOM) show that from January to July, 24,050 foreign-invested enterprises were established. Foreign capital in actual use totaled RMB533.14 billion, up by 7.3% year on year. The number in July was RMB54.82 billion, up by 8.7% year on year, outpacing the previous six months.
During our interviews, experts applauded the above achievements and believed China’s efforts to stabilize foreign investment were rewarding. As China seeks higher-quality growth and consumption, foreign businesses are now given new opportunities and growth areas. This means a lot for the global economy as growth slows down.
The report from the United Nations Conference on Trade and Development shows that as global economic growth loses steam, FDI around the world will go down even further. However, China’s actual use of foreign capital increased by 7.3%, which is nothing short of remarkable. Insiders believe, on the one hand, this is due to the country’s steady growth and expanding market; on the other hand, as China increases market access, and improves the legal and business environment, foreign investors can now go in more easily.
Official statistics show that Germany, Korea, Japan, and Netherlands—major investors in China—increased their investment by 72.4%, 69.7%, 12.6%, and 14.3% respectively; EU’s actual investment grew 18.3% over last year; Belt and Road (B&R) countries’ investment rose by 5% year on year.
“In recent years, not only has China developed itself, it has also created opportunities for many foreign businesses,” said Kevin Sneader, Global Managing Partner of McKinsey. He believed, despite slowing international trade and investment and rising protectionism, China’s opening up and transition have boosted investors’ confidence.
“We are confident about China’s continued opening up. This is why many European businesses want to participate in the 2nd China International Import Expo.” Armando Soldaini, Chairman of RomExpo, told China Trade News that more and more European companies wanted to present their products and expand their business through exhibitions in China.
China’s growth has shifted from high speed to high quality. As the market demands upgrade, and the economy changes gear, creative ideas and innovations emerge one after another. That’s why observant foreign businesses are moving faster to China.
China is not only creating a better environment for foreign investors—it is also improving how investments are used in different sectors. In 2019, Ineos invested RMB1.9 billion for its reginal headquarter in Shanghai; Upjohn, a Pfizer division, also opened its global headquarter in Shanghai; Siemens built in Beijing its first AI lab outside Germany; BMW invested an addition of EUR3 billion for its new factory in Shenyang, Liaoning Province; Saudi Aramco launched a new chemical project in Panjin, Liaoning Province with Chinese companies; Samsung started the second phase of its transistor storage chip project in Xi’an; BASF, a chemical giant, is building its most expensive production center in Guangdong…Quality investors are stepping up their presence across China.
MOFCOM’s latest statistics show: by sector, manufacturing utilized RMB154.8 billion of foreign investment, up by 2.7% over last year; service RMB371.57 billion, up by 9.3% YoY. High-tech manufacturing and service sectors maintained fast growth. According to the MOFCOM Department of Foreign Investment Administration, from January to July, capital used by high-tech industries grew 43.1% YoY, accounting for 29.3% of the total. High-tech manufacturing used RMB59 billion, up by 19% YoY.
Despite the headwind of protectionism, foreign businesses are not fleeing China; instead, their investments are multiplying. This can be mainly attributed to China’s opening up. Foreign investments in high-end industries are exactly in line with the country’s move to upgrade its development quality: institutional reform, greater opening up, policy support, industrial innovation, talent cultivation, an environment that is more open, fair, transparent, and predictable…Zhang Jianping, Director General of the Chinese Academy of International Trade and Economic Cooperation and member of the Expert Committee, China Council for the Promotion of International Trade, told us that investors focused on high valued-added manufacturing and service sectors while targeting the global market. “From this perspective, current investments largely align with China’s restructuring, as most happen in industries that the country prioritizes.”
The burgeoning Chinese market offers opportunities and profits that are too immense to ignore. As some experts point out, the emerging demographic dividend is also an important attraction for investors. The Chinese labor market has 900 million people, among which 170 million have received higher or vocational education. The country, which churns out 8 million university graduates every year, is improving both the amount and quality of its human resources.
Investors choose China, because of its promising economic potential. According to Xu Liping, researcher at the National Institute of International Strategy, Chinese Academy of Social Sciences, despite the rising instability and uncertainty in the world, China is better positioned to maintain a peaceful and stable environment, and its window of opportunity for development is here to stay.
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