Is China Attractive For Foreign Investors?
Foreign direct investment into the Chinese mainland in actual use topped the 1-trillion-yuan ($156.85 billion) mark in the first 11 months of 2021, surpassing the full-year FDI in 2020 and affirming China’s continued dominance as a top global investment destination.
Notably, FDI in the services industry accounted for about 80 percent of total investment in the first 11 months, maintaining robust growth momentum.
China has been accelerating the opening-up of its financial sector, removing foreign ownership caps for companies engaged in securities, fund management, futures, and life insurance in 2020, and widening access to the services sector in pilot free trade zones.
More foreign-funded companies settled in China last year. So far, more than a third of the nearly 1,700 licensed financial firms in Shanghai are foreign-invested, and the number continues to grow.
In 2005, services occupied just 24.7 percent of China’s total FDI. That increased to over 50 percent in 2011 and 77.7 percent in 2020, making services the top choice for foreign investors.
In 2015, the service industry occupied over 50 percent of China’s GDP. Under the impact of COVID-19, services contributed to 54.2 percent of China’s economic growth in the first three quarters, becoming a vital force to maintain the economy’s steady progress.
Although the expanding flow of foreign investment into the services sector is impressive, analysts said the manufacturing sector, the traditional gold mine for overseas investors, is by no means shrinking.
It may seem as though foreign investment is flowing more into services and less into manufacturing, but foreign investors are placing more attention on research and development, said Fang Aiqing, deputy director of the economic committee of the Chinese People’s Political Consultative Conference (CPPCC) National Committee.
In the first 11 months, the services for high-tech enterprises saw FDI inflows jump 20.8 percent year-on-year, with services such as legal, consulting, human resources, and intellectual property covering manufacturing-related industries.
US chemical giant Dow has established an innovation center in Shanghai, and it is the company’s largest R&D center outside the United States.
The company signed a memorandum of understanding to build a new manufacturing hub in Zhanjiang, Guangdong province. Dow will initially invest $250 million.
“In the longer term, we foresee that the transformation of China into a low-carbon society will accelerate and provide Dow with opportunities to use our local capability and world-leading innovation to invest more,” said Jon Penrice, president of Dow Asia-Pacific.
