Q: Citing preliminary balance of payments data for 2023 released by the State Administration of Foreign Exchange (SAFE) of China on February 18th, Bloomberg recently reported that China's foreign direct investment (FDI) fell by 82% last year, slumping to a 30-year low. What is your comment on this?
A: Certain media selectively cited SAFE's preliminary statistics to interpret China's foreign investment trend, with an intention to hype up so-called “exodus” of foreign investment from China and weaken China's growth prospects. However, the fact is:
From the perspective of long-term data, global FDI fluctuates. In recent years, faced with the impact of COVID-19 pandemic, imprudent monetary policy of developed economies and complex international political situation, volatility of global FDI has increased. After rising to a relatively large scale in2021, global FDI continuously fell in 2022 and 2023. China's FDI changes reflect this trend.
From the perspective of the balance of payments, FDI in many countries has declined significantly. China's FDI is in line with the global trend and is significantly affected by factors like changes in external financial conditions. However, the new capital funds, which indicate multinational corporations’ willingness to invest in the long run, are relatively stable, and the magnitude of change is significantly smaller than that of the overall situation of FDI.
From the perspective of actual use of foreign capital, statistics from the Ministry of Commerce show that China’s actual utilized FDI exceeded RMB 1.1 trillion in 2023. Despite a 8% year-on-year decline, it is still the third highest in history after 2021 and 2022 and remains at the forefront in the world.
This January, 4,588 foreign-funded companies were established in China with a year-on-year increase of 74.4%. Actual utilized FDI in high-tech manufacturing jumped by 40.6% and more and more multinational companies have chosen to establish R&D centers in China. Foreign businesses’ investment structure in China is improving. The investments of some advanced economies in China grew at a relatively faster speed. France and Sweden witnessed 25 and 11 times of growth of their investments in China. Germany, Australia and Singapore had an increase of 211.8%, 186.1% and 77.1% in their actual investment in China.
In general, most multinational corporations have been bullish about the prospects of China’s market in the long run and remain confident about investing in China.
With the gradual improvement of both internal and external economic and financial environments and the consolidation of China's new advantages in attracting foreign investment, China’s FDI is in a position to stabilize and rebound.
Firstly, the improvement of the internal environment will help the gradual recovery of FDI. The market now generally expects that major developed economies are about to make adjustments to their monetary policy, and the condition of liquidity will generally improve, which will help international investments become more active. At the same time, China's economy maintains the development trend of recovery and improvement. As its business environment continues to improve and foreign investment willingness is expected to be further enhanced.
Secondly, China's complete industrial system and vast market space still have relative advantages. China has developed all the industrial categories listed in the United Nations industrial classification. It has strong industrial support and integration capacity and high-quality labor force, which will boost the development of companies coming to China. Meanwhile, China's middle-income group of more than 400 million people is a vast market that can never be ignored.
Last but not the least, the structure of China's foreign investment has continuously been optimized, and new growth drivers are being cultivated. China's foreign investment is undergoing structural changes.The proportion of utilized foreign investment in high-end manufacturing and emerging service industries is increasing. In the future, with the continuous development of electronic technology, new energy, semiconductors and intelligent technology, high-end manufacturing and emerging service industries are expected to become major areas of foreign investment.
China, committed to high-standard opening-up, will continue to foster a market-oriented, law-based and world-class business environment, and provide more support and convenience to foreign companies investing and doing business in China. As always, we welcome the business sectors in our consular district to continue advancing exchanges and cooperation with China and sharing the opportunities and benefits brought by China’s development.
