FDI Growth to Remain Robust, Experts Say

The growth of foreign direct investment in China will maintain its sound pace this year, thanks to the country’s robust economic recovery and moves to upgrade its industries and further expand local demand, experts and business leaders said on June 14.

Despite the fact that many foreign economies fully resumed production later last year, the completeness of their industrial and supply chains cannot compete with China’s, said Liu Xiangdong, a researcher at the China Center for International Economic Exchanges in Beijing.

Due to China’s high vaccination rate and the swift recovery of its manufacturing sector, services sector and foreign trade, the nation has emerged as a safe and lucrative place for global capital, supported by the dual-circulation development paradigm — in which the domestic market is the mainstay and the domestic and foreign markets reinforce each other, Liu said.

After surpassing the United States as the world’s biggest recipient of foreign investment last year, China’s actual use of foreign capital soared 35.4 percent on a yearly basis to 481 billion yuan ($75.3 billion) in the first five months of this year. The volume surged 30.3 percent from the same period in 2019, data from the Ministry of Commerce showed.

Meanwhile, foreign investment in the service industry came in at 381.9 billion yuan between January and May, up 41.6 percent year-on-year.

Chen Bin, executive vice-president of the Beijing-based China Machinery Industry Federation, anticipated that China’s attractiveness as a location for FDI will continue to grow in the second half of 2021, as the COVID-19 pandemic has seen a resurgence in export-oriented countries, including India, Vietnam, Malaysia and Thailand, in recent months.

“If both domestic and global manufacturers in those countries are severely disrupted by the pandemic and stop working, it will have an impact on the global supply chain, and more FDI may keep flowing into China this year,” said Ding Yifan, a senior research fellow at the Institute of World Development at the Development Research Center of the State Council.

Nearly 60 percent of European companies plan to expand their business in China this year, compared with 51 percent last year, according to a survey released last week by the European Union Chamber of Commerce in China.

About half of the surveyed companies said that their profit margins in China are higher than the global average. This proportion was 38 percent last year.

Toni Petersson, CEO of Oatly Group AB, a Swedish food and beverage company, said the company will bring its first plant in China in Ma’anshan, Anhui province, into operation later this year.

Supported by a local innovation team, the company, apart from supplying plant-based milk, will tailor exclusive products such as ice cream for Chinese consumers to offer them more options, he said.

US multinational conglomerate Honeywell said it plans to invest in China’s refinery sector over the next five years.

“We see China’s carbon-neutral commitment as an opportunity to join hands with Chinese partners to realize the refinery transformation by converting crude oil into more and more petrochemical products, or even completely into petrochemical products,” said Henry Liu, vice-president and general manager of Honeywell Performance Materials and Technologies Asia-Pacific.

Ren Xingzhou, former director-general of the Institute for Market Economy of the Development Research Center of the State Council, noted that stabilizing foreign investment inflows is a vital policy target, as it is key to technological upgrading and ultimately to long-term growth.

“China has leapfrogged ahead of many advanced economies in newly emerging areas such as e-commerce, electric vehicles, artificial intelligence and new infrastructure projects, but needs to continue its technology upgrading in other areas, including environmental protection, and the agricultural and manufacturing industries,” she added.

Vorwerk Group, a German industrial and technology company, will establish a digital solution center in Shanghai in the second half of this year to facilitate its transformation from a manufacturing company to a service-oriented manufacturer.

“This move will help many global companies better adapt to China’s market,” said Cha Sheng, general manager of Vorwerk China.