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China's enhancing 'centripetal force' for foreign capital Release date: 2021-08-12    Source:Global Times

China's foreign direct investment (FDI), in actual use, surged 28.7 percent year-on-year to 607.84 billion yuan ($90.96 billion) during the first half of the year. The figure puts the average H1 growth over the past two years at 12.7 percent, data from China's Ministry of Commerce (MOFCOM) revealed.

In the meantime, FDI around the world has fallen sharply, with global FDI down 42 percent in 2020 compared with that of 2019 and even 30 percent below the wake of the global financial crisis. The decline was mainly experienced by developed countries where FDI inflows fell 69 percent, the lowest level in the past 25 years. 

The reason why China has shown accelerating "centripetal force" for foreign capital amid the gloomy global environment is mainly due to its high-level opening-up and the continuous improvement of the policy environment in recent years. 

For starters, China's commitment to further opening up has allayed the concerns of foreign investors. The sudden onslaught of the novel coronavirus has dragged the global economy into a period of stagnation, with intensifying protectionism and unilateralism. The multilateral trading and economic system built after the Second World War has slipped into crisis.

There is an urgent need for major powers to step forward and take the lead in guiding the world towards sources of global economic growth, and re-establish the authority of openness and multilateralism. To this end, China, while accelerating domestic recovery, has continued to promote a series of opening-up measures, sending out positive signals.

For instance, China in November held the China International Import Expo as scheduled which not only marked the initial completion of China's transition from a major exporter to a major importer, but also clarifies China's positive attitude towards opening up and cooperation for the goods, capital and services from all over the world.

Moreover, China's increasingly well-calibrated business environment has boosted the confidence of foreign investors. MOFCOM has recently unveiled the plan for commerce development in the 14th Five Year Plan period from 2021 to 2025, vowing to increase efforts to bring its opening-up agenda to a new level in the commerce field during the period. Also, the stability and sustainability of China's policies have impressed foreign investors.

According to surveys conducted by the American Chamber of Commerce in China, 50 percent of its members endorsed the constant improvement in China's business environment, 85 percent have no plans to move their production capacity and supply chain out of China, and 75 percent have high confidence in continuing to be benefited from the reform and opening up measures in the Chinese market and will continue to consider China as one of the top three global investment destinations.

In addition, the rapid economic recovery from the pandemic has reassured international investors. Over the first six months of 2021, China's GDP reached 53.22 trillion yuan, a 12.7-percent increase year-on-year, official data showed. The figure puts the average H1 growth for the past two years at 5.3 percent.

China's position as the "world factory" has not only been enhanced, it further expanded its share in the global trade, highlighting the attractiveness of Chinese market. Multinationals such as US-based Honeywell, Tesla, Disney, and Japan-based G-TEKT have planned new investment in the market. A recent survey released by the European Union Chamber of Commerce in China showed that 73 percent of the interviewed companies said they achieved profitability last year, and about 60 percent of European companies plan to expand their businesses in China this year.

As the world's second largest economy, China has successfully forged a path to stable economic recovery through a series of effective economic governance tools, and led the recovery and growth of the global economy in the post-pandemic era, boosting confidence for business and international capital in the Chinese market. Many American companies have chosen to stay in China and continue to expand investment, even at the height of the trade friction between the two nations. Behind the choice is they witnessing China continue to be one of the most robust economies globally despite the pandemic and it maintains greater growing potential than most of other major economies in the future.

(The author is a research fellow at the Chinese Academy of International Trade and Economic Cooperation.)

By Song Wei