Foreign investors continue to show faith in China’s economy

Foreign investors continue to show faith in China’s economy

Despite the slowdown in growth in the world’s economy China is continuing to attract foreign direct investment, according to the country’s Ministry of Commerce.

It said the strength of its supply chains, beefed-up protection of intellectual property rights and a stable domestic market are some of the factors behind the 17.4% increase year-on-year in foreign direct investment. In total, it was worth 723.31 billion yuan ($107.41 billion) in the first half of the year.

“The rapid growth of foreign direct investment shows that short-term economic disruptions caused by the Omicron variant of the Covid-19 virus will not undermine China’s ability in attracting global capital in the long run,” said Bai Ming, deputy director of the international market research department at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

And Matthew Margulies, vice-president of China operations for the US-China Business Council, said the fact that the Chinese domestic market offers $5 trillion worth of consumption growth opportunities over the next decade makes it very attractive to US companies.

Multinational organisations have gained significant financial returns in various sectors since China began opening up in the late 1970s, said Zhang Yongjun, a researcher at the China Center for International Economic Exchanges.

Zhang predicted that China will see “a stable flow of foreign direct investment this year and said the country's strength in keeping consumer prices stable and facilitating the operations of global supply chains will bolster stabilization and recovery of the world economy in the coming years”.

 

Renewed commitment to opening up

During a meeting of the Political Bureau of the Communist Party of China Central Committee in July, policymakers stressed the important role of reform and opening up in boosting economic development, the China Daily website has reported.

Chen Chunjiang, director-general of the foreign investment administration department at the Ministry of Commerce, said: “The government will continue to optimize the business environment, improve services for foreign investors, strengthen regular exchanges with foreign companies and business associations and actively respond to their suggestions.

“While expanding the number of comprehensive pilot areas for further opening up the service sector in the second half, the country will accelerate the revision of the catalogue of sectors encouraging foreign investment, and guide foreign capital into fields such as high-end manufacturing and scientific innovation, as well as into the central, western and north-eastern regions of the country.

China’s high-tech manufacturing sector saw particularly strong growth, rising 31.1% between January and June 2022 compared with the same period last year. And investment in the high-tech service sector jumped 34.4% in the first half, according to Commerce Ministry data.

Direct investment from the Republic of Korea, the United States and Germany respectively climbed by 37.2%, 26.1% and 13.9% year-on-year.

Nathan Stoner, vice-president of the US-based power company Cummins Inc and chairman of Cummins China, said its business in the country “is vital to the group’s growth globally. China continues to be the largest end-market by volume in many of its markets, and one of the fastest developing markets for new energy like hydrogen,” he said.

He said the company will start operations at its expanded East Asia research and development center in Wuhan, Hubei province, in the third quarter of the year, with $150 million in investment to incubate new technologies.

Calvin McDonald, CEO of Lululemon Athletica Inc, a Canada-based athletic and leisurewear company, said China is expected to be its second-largest market worldwide by 2026 through new store openings and expansion of its product portfolio. He said it plans to triple the number of stores on the Chinese mainland from the current 71 to 220 within five years.

“Our new goal is to quadruple our international business again by 2026. China will be a big part of that opportunity as we continue to invest in the market, stores and digital sales solutions,” he said.