The growth rate of attracting foreign investment is slowing down! Is China still fragrant to global investors? Year-on-year | data | global

The growth of China's absorption of foreign investment seems to be slowing down.

According to the latest official data, the actual amount of foreign investment used by China in the first five months of this year was 574.81 billion yuan, a year-on-year increase of 0.1%, and the growth rate decreased by 2.1 percentage points from January to April. If converted to US dollars, the actual amount of foreign investment used by China in the first five months decreased by 5.6% year-on-year.

Is China still fragrant to global investors?

In the first quarter of this year, China's absorption of foreign investment increased by 4.9% year-on-year, with a growth rate of 2.2% in the first four months and further dropping to 0.1% in the first five months.

The growth rate of foreign investment absorption has decreased, largely due to the higher base in the same period last year.

The person in charge of the Foreign Investment Department of the Ministry of Commerce stated that from January to May last year, major projects were concentrated in investment, and the amount of investment attracted in US dollars reached the highest level in history, resulting in a large base for the same period last year. In addition, recent fluctuations in the US dollar exchange rate have also had an impact.

Analysts point out that foreign investment inflows themselves have volatility. Short - and medium-term factors such as tax burden, interest rates, inflation, and capital account openness change rapidly and may affect foreign investment decisions at any time.

In addition, investment projects themselves have significant differences in scale, and sometimes a large project can drive a significant increase in the number of foreign investment inflows. Therefore, the absorption of foreign investment in a certain month or months cannot represent the overall trend.

It is worth noting that since the beginning of this year, multinational company executives have frequently sparked a "coming to China fever". After the optimization and adjustment of epidemic prevention and control policies, from March to May, a group of foreign company executives competed to visit China, including Tesla CEO Musk, Apple CEO Cook, Nestle Group CEO Schneider, BMW Group Chairman Zipce, Siemens Board Chairman, President and CEO Fu Leren, Rio Tinto Group Chief Business Officer Bai Ruiming

During their visit to China, foreign executives were generally full of confidence in the prospects of China's economic development and expressed their willingness to continue deepening their efforts in the Chinese market and investing in China. Musk said that Tesla opposes decoupling and disconnection, and is willing to continue expanding its business in China and sharing development opportunities in China.

According to official data, there were 18532 newly established foreign-invested enterprises in China from January to May this year, a year-on-year increase of 38.3%. From this data, it can be seen that China's "magnetic force" towards global investors has not weakened, but is actually increasing.

This kind of "magnetic force" ultimately stems from the increasingly prominent economic vitality of China. At a time of overall global economic downturn, the Chinese economy continues to recover. Recently, several international organizations and institutions such as the World Bank and the OECD have raised their expectations for China's economic growth rate this year.

In this situation, for foreign companies, China has become a "must compete" place to boost performance.

The China Council for the Promotion of International Trade recently released the "2023 First Quarter China Foreign Investment Business Environment Research Report", which shows that over 80% of surveyed foreign companies expect their investment profit margin in China to remain unchanged or increase this year, and over 90% of surveyed companies expect their investment profit margin in China to remain unchanged or increase in the next five years.

How to win more "trust votes"?

China has received a "vote of trust" from foreign investment, but in the increasingly fierce international competition for attracting investment, winning more "votes of trust" requires more efforts.

Pan Yuanyuan, Associate Researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences, said that maintaining China's steady growth in attracting foreign investment can be approached from two dimensions: economy and expectations.

She believes that in addition to strengthening China's advantages in the industrial chain and market, simple and convenient procedures for foreign investment regulation, continuous online investment services, and convenient work and life for investors are also helpful in improving foreign investment returns. In addition, it is necessary to establish clear, stable, and sustainable expectations. This includes various aspects such as firmly expanding openness, reducing negative lists, promoting fair competition, enhancing intellectual property protection, and enhancing communication mechanisms.

Regarding this, the authorities have already taken action. Minister of Commerce Wang Wentao previously stated that this year he will study and promote the rational reduction of the negative list of foreign investment access, and further cancel or relax restrictions on foreign investment access. In addition, high standards will be implemented to ensure the national treatment of foreign-funded enterprises. In response to relatively concentrated issues raised by foreign-funded enterprises, such as government procurement, bidding, and standard setting, relevant departments will study and introduce policy measures to ensure equal participation of foreign-funded enterprises.

Now, the Ministry of Commerce has launched a series of investment promotion activities for the "Investment in China Year", and various regions have also increased their efforts to "invite in" investment promotion.

As announced by Guangdong, new projects established in Guangdong with an annual actual foreign investment amount exceeding 50 million US dollars and capital increase projects exceeding 30 million US dollars will be rewarded at a ratio of no less than 2% of their actual foreign investment amount for the year, with a maximum reward of 100 million yuan; Jiangsu proposes to encourage foreign-invested enterprises to reinvest profits and support manufacturing foreign-invested enterprises in expanding their markets.

Analysts believe that with the accelerated economic recovery and improved business environment, China's absorption of foreign investment this year is expected to be better than last year.