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【MK sports】China's foreign investment structure continues to optimize

Source:MKsports time:2024-12-23 18:35:43

Guan Tao Photo: Courtesy of Guan Tao

Guan Tao Photo: Courtesy of Guan Tao


As the third plenary session of the 20th Communist Party of China (CPC) Central Committee held in Beijing from Monday to Thursday is MK sportsexpected to primarily examine issues related to further comprehensively deepening reform and advancing high-quality development of the Chinese economy, how China will continue to adhere to a high level of opening-up and better utilize foreign investment in the years to come has attracted widespread attention.

For some time, certain Western media outlets have been sensationalizing the rhetoric of "foreign investment fleeing China." However, these reports failed to acknowledge the positive changes seen in the structure of foreign direct investment (FDI) in China and the improving conditions for foreign-funded enterprises operating in the country. To have an accurate picture of the utilization of foreign capital in China, we have to take into consideration the quality and methods of investment in addition to the total amount of FDI.

China saw 26,870 new foreign-invested enterprises established in the first half of 2024, representing 14.2 percent year-on-year growth. The country attracted nearly 500 billion yuan ($68.87 billion) in foreign investment during the same period, remaining at an elevated level for nearly one decade, according to data released on Saturday by the Ministry of Commerce.

The structure of foreign investment continues to be optimized, with the proportion of foreign investments in manufacturing industry in the first half of 2024 increasing by 2.4 percentage points to 28.4 percent compared to the same period in 2023. Specifically, the proportion of foreign investments in high-tech manufacturing has also increased by 2.4 percentage points. This indicates that foreign investors are seeking to leverage the accelerating development of new quality productive forces and trend toward new industrialization in China. They are actively adjusting their investment layout in related fields.

The data demonstrate that China has continued to enhance the quality of investments, promoting the development of new quality productive forces and advancing toward high-quality development.

Looking back on China's utilization of foreign investment in 2023, although the share of foreign investment in China has decreased, it still remains above the country's pre-epidemic average. It is important not to overstate the decline in share of foreign investment in China. To objectively assess China's FDI condition, it is also necessary to consider the broader international environment.

Due to the global economic slowdown, tightening financing conditions, and geopolitical tensions, global foreign direct investment decreased by 2 percent in 2023 to $1.3 trillion, according to a report by the United Nations Conference on Trade and Development.

Since the beginning of 2024, the continuous postponement of the first interest rate cut by the US Federal Reserve has led to an increase in the global cost of financing and tighter financing conditions. Additionally, the negative impact of geopolitical factors on China's attractiveness to foreign investment continues to be apparent. Volatility in the international economic landscape has made the task of stabilizing foreign investment in China a challenging one.

Facing a complex external environment, the State Council executive meeting held on February 23 emphasized that stabilizing foreign investment should be a key focus as part of this year's economic agenda. In March, the General Office of the State Council issued the "Action Plan for Solidly Promoting High-level Opening Up and Attracting and Utilizing Foreign Investment with Greater Intensity," proposing 24 measures in five areas. On June 26, the State Council executive meeting once again discussed the utilization of foreign investment, emphasizing the need to increase efforts to attract and utilize foreign investment and take multiple measures to stabilize foreign investment.

In the manufacturing sector, China announced the comprehensive cancellation of restrictions on foreign investment access, welcoming foreign enterprises to invest and share development opportunities in the country. Additionally, a number of Chinese provinces are actively hosting exhibitions, and some special economic zones are expanding market access even further.

The Ministry of Commerce as well as provincial commerce authorities have held a series of roundtable meetings for foreign companies in China to solicit more direct feedback on important issues or concerns. Governments at all levels in China are working hard to create an open, fair, nondiscriminatory legal environment and business environment for foreign companies operating in China.

These efforts play an important role in deepening the opening-up of China's specific areas to the outside world, stabilizing foreign investment in manufacturing and services industries, while laying the foundation for foreign trade. With China expanding its opening-up, improving the business environment, and increasing its efforts to attract foreign investment, it will undoubtedly provide more opportunities for foreign enterprises.

With a series of policy measures taking effect, China will become a more attractive and accessible destination for foreign investment. 

The author is global chief economist at BOC International under Bank of China. [email protected]