Affected by the gradual fading of the advantages of the traditional factors of China, together with the slowdown of global investment, the backflow of American manufacturing industry and the rising of investment protectionism, “disinvestment and leaving China” have been a popular view at international level. However, it is quite different in actual practice.

 

In accordance with the data released by the National Development and Reform Commission on February 17, in 2015, China attracted total foreign investment of USD126.27 billion, up 5.6% year-on-year, showing a relatively high increase over recent years.

 

First, some of the characteristics of foreign investment in China in 2015 are as follows.

 

As one of the best places for investment, China is still one of the first choices of global investors and has been maintaining a high performance in attracting foreign investment. China has been ranking first among the developing countries for 24 consecutive years. The Global Investment Trends Monitor Report released by United Nations Conference on Trade and Development (UNCTAD) indicated that, in 2014, for the first time, China became the largest recipient of Foreign Direct Investment (FDI) in the world. 

 

In 2015, the Chinese service industry attracted foreign investment of USD77.18 billion, up 16.5% year-on-year. The proportion of foreign investment attracted by the Chinese service industry in the total foreign investment attracted by China increased from 24% in 2001 to 61.1% in 2015. Both the scale and proportion of newly added foreign investment in use of the manufacturing industry had a decline. However, the structure is gradually being optimized, with high-tech manufacturing sector attracting nearly one fourth of the foreign investment. Moreover, the some foreign-invested manufacturing enterprises have made adjustment of their businesses to China. This is just the real background of the so-called “great disinvestment”.

 

The characteristics of foreign investment in China in 2015 mentioned above just reflect the overall steady state of China’s foreign investment attracting. The actual conditions do not support the adjustment that “China’s investment environment shows a tendency for deterioration”. This is one of the grounds.

 

The second ground is that China’s investment environment has been increasingly optimized, as proved below:

 

The central leaders of China have made their attitudes clear in succession. At the 16^th Meeting of the Leading Group for Deepening Reform Comprehensively, Chinese President Xi Jinping emphasized that it is a must to firmly practice the basic state policy on opening-up and more proactive opening-up strategies, improve the level of open economy, attract foreign investment and technologies and improve opening-up systems and mechanisms to deepen the reform by expanding opening-up and expand the opening-up by reform and to inject new impulse, add new vitality and expand new space for economic development. When addressing at the opening ceremony of the World Economic Forum 2015, Chinese Premier Li Keqiang said that the general policies of China on using foreign investment will not change and China will continue to expand the field of foreign investment to develop the country into the most attractive FDI destination in the world.

 

In addition to the increasing support of the top leaders of the country, in 2015, China adopted a series of measures to create a law-based and internationalized business environment. For example, the Catalogue for the Guidance of Industries for Foreign Investment (amended in 2015) was released, with emphasis laid on expanding the opening-up of the service and general manufacturing industries. From an overall perspective, restrictive terms were reduced by 50%, while terms with requirements for proportion of shares were reduced by 40%. In addition, the Special Administrative Measures for Access of Foreign Investment to Pilot Free Trade Zones (Negative List) was released, leading to further expansion of opening-up based on the Catalogue for the Guidance of Industries for Foreign Investment (amended in 2015), further reform of foreign investment management systems, and great reduction of restrictions on access of foreign investment. Currently, domestic investment and foreign investment projects are basically under unified management. Overseas investors basically enjoy national treatment, except for those in a few of fields.

 

From this perspective, the golden time for foreign investment featuring low factor cost is gradually fading away. Even under such a circumstance, China still shows strong competitiveness in terms of comprehensive factors. It is still one of the biggest markets in the world, manifesting increasingly prominent market advantages.

 

At the same time of refuting the claim that “China’s investment environment shows a tendency for deterioration”, we should not regard the negative public opinions concerning foreign investment attracting and expansion of economic opening-up with indifference. We should be aware of that there are indeed policy and market bottlenecks, including psychological obstacles, for the further expansion of China’s economic opening-up.

 

In the future, China needs to enhance the quality of foreign investment attracting at the same time of enlarging the amount of attracted foreign investment. Notably, there is huge space for improving China’s innovation ability with foreign investment. Just because that initiative expansion of economic opening-up has great significance in promoting the restructuring of China’s economy and improving the economic performance of China, the key to firmly promote foreign investment attracting not only lies in our attitude but also lies, and even more, in our practical actions.

 

Source: Translated from Invest Guangzhou, February 18, 2016