China advances high-standard opening up, draws more foreign investors

Published: March 05,2024

As China continues to open its doors wider to the global market, the country’s foreign direct investment (FDI) has seen robust growth amidst a complex global economic environment.

In 2023, China’s actual foreign direct investment (FDI) reached over 1.13 trillion yuan (approximately $158.89 billion), a historical high, according to the Ministry of Commerce. This level of FDI (including financial investments), exceeding 1 trillion yuan for the first time in 2020, marks the beginning of a stable growth trend continuing through 2021 and 2022.

Reflecting this trend, the number of newly-established foreign-invested enterprises in China rose to 53,766 in 2023, a 39.7 percent year-on-year increase. Moreover, the focus on innovation is evident in the allocation of foreign investment, with high-tech industries attracting 423.34 billion yuan, accounting for 37.3 percent of the total foreign capital utilized, setting a new record high.

Foreign investment in high-tech manufacturing, particularly in sectors like medical equipment and electronics manufacturing, experienced notable growth. Additionally, the construction industry, innovation-to-application services, and R&D and design services also saw growth, reflecting a broad-based expansion in foreign investment across diverse sectors.

Foreign investment in China is not only increasing in volume but also in variety, with contributions from economically robust countries. In 2023, German investment reached a record 11.9 billion euros ($12.7 billion), according to Bundesbank data. From January to November 2023, investments from the UK and France surged by 93.9 percent and 93.2 percent, respectively, with notable rises also from the Netherlands, Switzerland and Australia.

Prominent multinational companies have played a pivotal role in this investment surge, indicating businesses’ confidence in China’s market.

Since 2023, foreign-funded enterprises like PepsiCo, Inc. have been boosting their investments in China. PepsiCo established its first Asia-Pacific global business service center in Chengdu, Sichuan, to advance digitalization and innovation in 2023. The company invested $80 million in building its first “carbon neutral” factory in Shandong, slated for completion and operation this year.

“The Chinese market offers immense opportunities, boasts a momentum of high-quality development, benefits from numerous favorable policies for attracting foreign investment, and possesses a talent advantage,” said Xie Changan, CEO of PepsiCo Greater China. “We are committed to capitalizing on opportunities in China, which remains a crucial engine for our growth.”

Other multinational corporations across diverse sectors, including KFC and Standard Chartered, have also stepped up their investments. In November 2023, the fast-food behemoth McDonald’s announced plans to increase its ownership stake in its China operations from 20 percent to 48 percent.

PepsiCo, Inc. sets up its first Asia-Pacific global business service center in Chengdu, southwest China’s Sichuan Province, which began operations in January 2023. /CMG

Building an optimal investment environment

The optimized structure and steady growth in attracting foreign investment underscore China’s commitment to fostering a dynamic and inviting business environment.

Since 2023, the Ministry of Commerce, along with other departments, has implemented favorable policies to bolster economic development zones by expanding manufacturing investment. They have introduced 16 specific measures aimed at further encouraging foreign investors to establish R&D centers.

Starting from July last year, the ministry has implemented a roundtable meeting system for foreign-funded enterprises. This system organizes regular meetings to gather feedback from foreign-invested enterprises, addressing their challenges and collaboratively finding solutions with relevant departments and localities.

By the end of January 2024, provinces across China have set up roundtable meeting systems, holding over 140 meetings, drawing participation from over 2,200 foreign-funded enterprises and foreign business associations, with over 900 problems and appeals being resolved.

The image shows a high-tech zone in Taicang, located in eastern China’s Jiangsu Province, which is a hub for German-funded enterprises and a city neighboring Shanghai, January 23, 2024. /CFP

Additionally, an online platform designed to gather the issues and challenges faced by foreign-funded enterprises was launched in September last year, with the goal of offering an accessible channel for voicing concerns.

“In the next step, China will continue to enhance the implementation of diverse measures, while also keeping foreign-invested enterprises informed about advancements in key areas like government procurement, standard setting and investment facilitation,” said Zhu Bing, director of the foreign investment administration department at the Ministry of Commerce.

“Should foreign-invested enterprises experience any challenges or issues while accessing these policies, they are invited to report them to us,” he added.

China will effectively utilize the roundtable meeting system to gather opinions and suggestions from foreign enterprises regarding various opening-up measures and policy formulation. This approach will also help us understand international experiences and practices, aiding in our efforts to enhance the stabilization of foreign investment, Zhu noted.

cgtn.com