If marketization, internationalization, industrialization and urbanization have brought with the 30-year high-speed growth and resulted in the “present day” of the Chinese economy, the “new transformation” in the four aspects of consumption expansion, service industry development, digitalization (intelligentization) and greening will continuously push forward the growth at the medium-speed platform, creating the “future” of the Chinese economy.

 

As one of the core factors for the Chinese development mode, foreign direct investment remains to be indispensable. However, the significance of foreign investment for China is taking changes. Setting in the great background of economic “new transformation”, a steady amount of foreign investment still has realistic significance, but the key is the enhancement of the quality of foreign fund.

 

Quality foreign investment usually shows the three features: high technology and knowledge content, high-end value chain and high added-value. For the first- and second-tier cities, the functions of multinational headquarters, R&D design center, advanced manufacturing and high-end service sector are the targets of quality foreign investment.

 

Since China’s reform and opening-up, the investment projects by mainstream multinationals have shown advantages in many aspects such as technology and management, and brought with vast demonstration and produced spillover effect. Yet, judging the overall inventory of foreign investment, there is less that meets the standards of three features. In future, whether the foreign investment is to play a significant role in China’s economic transformation, upgrading and sustainable growth will be decided by the real arrival of the quality “new foreign investment”. The access in the policy perspective, competition in industrial perspective and localization in the enterprise perspective will be the key factors deciding the contribution of the development of foreign investment.

 

Statistics from the Ministry of Commerce indicate the proportion of foreign investment in the service industry exceeded that in the manufacturing sector in 2011. It reached 50% for the first time in 2013 and 55% in 2014. From the aspect of micro-economy, in the composition of GDP, service industry exceeded manufacturing industry in 2014 and reached 50% for the first time in 2015. Obviously, great changes took place in the structure of foreign investment in recent years, which is identical with the “continuous tense” of the industrial restructuring.

 

With the continuous growing of payment and production costs, China’s competitiveness in the low-end and labor-intensive industries is vanishing. Compared with keeping the fortress at a low tide, making upward breakthroughs is a smart choice. The foreign investment policy for the economic “new transformation” should focus on the high end. Due to the reality of international competition, the support and flexibility for the quality foreign investment need to be strengthened. By promoting “new transformation” by means of “new foreign investment”, it will be a new start for the new year of 2016.

 

Source: Translated from Invest Guangzhou, Jan. 4, 2016