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China’s absorption of foreign investment to maintain steady trend

(People's Daily Online)

14:15, February 25, 2013

Latest data released by the Ministry of Commerce show that China's actual use of foreign investment in January 2013 was 9.3 billion U.S. dollars, a year-on-year decline of 7.3 percent (excluding data of banking, securities, and insurance fields). Foreign investment in China has been declining for eight consecutive months. Despite of such decline, experts believe that one month's data does not represent the situation of the whole year, China is still one of the best investment destinations, and the scale of foreign investment absorption will maintain a stable trend this year.

China is still the best investment destination

According to the preliminary study and conclusion by the Ministry of Commerce, the scale of foreign investment in China will continue to maintain a steady trend without any significant decline in 2013. This is mainly because, from the whole, the major impetus that maintains the growth of China's utilization of foreign capital has not disappeared.

Ministry of Commerce spokesman Shen Danyang said China's macro-economic growth is expected to continue this year, providing a stable basis for the utilization of foreign capital.

Besides, China's comparative advantages in utilization of foreign investment still exist. Despite the rising labor costs and restrained resources, energy, and land in some places, the fundamentals of economic and social development are getting better.
There are many favorable factors for the utilization of foreign capital, including the huge potential of the domestic market, the complete supporting industries, the prominent agglomeration effects, the rich human resources, the relatively high overall inner quality, and the constantly improved investment environment.

"China's huge market potential is a big advantage in attracting foreign investment," said Mei Xinyu, researcher at the International Trade and Economic Cooperation Institution under China's Ministry of Commerce.

Mei said that China's adoption of an open market economy will provide more opportunities for local enterprises and foreign-funded enterprises. With the enhancement of China's economic strength and status, more and more investors consider China as a safe haven. The status and role of China as a safe haven is emerging and will become increasingly prominent.

In addition, multinational companies still regard China as one of the major investment destinations.

According to researches by American Chamber of Commerce in China and European Union Chamber of Commerce in China, most multinational companies think China's strategic position is even more important than before and they plan to continue to expand their business in China in the next few years.

UNCTAD survey also shows that China is still the first choice of investment by multination companies.

Absorption of foreign investment to show steady trend in the future

Experts generally believe that there are many good signs despite the negative growth in the amount of foreign capital absorption in January. For instance, the number of newly established foreign-invested enterprises nationwide grew 34.3 percent, the amount of contracted foreign capital also increased by 13.1 percent. The number of newly established foreign-invested enterprises has always been regarded by the industry as the forward-looking indictor for the amount of attracted foreign investment in the coming few months.

"In the future, a rising proportion of foreign investments will target the Chinese market," said Mei.

Mei said that most of the foreign investments in the Chinese mainland were targeting overseas markets in the past but a rising proportion of foreign investments will target the Chinese market in the future. In addition, with enhanced economic strength, some emerging market economies will input significantly increased direct investment in China.

Zhan Xiaoning, director of Investment and Enterprise Division under United Nations Conference on Trade and Development said China's attraction of foreign investment has entered a mature stage and will further turn from growth in quantity to upgrade and optimization of quality and structure. High value-added, high-tech foreign investment as well as high-end manufacturing and service industries will attract a further rising proportion of foreign investment.

"In the coming years, China's absorption of foreign investment will basically maintain a relatively stable trend," said Li Yushi, vice president of the Research Institute of International Trade and Economic Cooperation under the Ministry of Commerce.

Li said that the key is to make more efforts in improving the quality of foreign investment absorption and we should utilize the strong technological spillover effect of foreign investment in China's domestic production process to raise our technology level.

Read the Chinese version at: 吸引外资今年不会“跳水”, Source: People's Daily Overseas Edition, Author: Zhao Pengfei

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