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Inbound FDI Grows
By Morgan Brady

BT 201803 Investment 02      利用外资是我国对外开放基本国策的重要组成部分,是我国互利共赢开放战略的成功实践。据我国商务部统计,2017年1-11月期间,全国新设立外商投资企业30815家,同比增长26.5%;实际使用外资金额8036.2亿元人民币,同比增长9.8%(折1199.1亿美元,同比增长5.4%)。其中,东盟、欧盟对华投资都增长迅速,“一带一路”沿线国家对华投资新设立企业3529家,同比增长42.8%。整体来看,我国对外商投资的吸引力较强,吸引外资规模始终保持全球前三,基本面总体稳定。




BT 201803 Investment 01 编辑China is becoming increasingly attractive for foreign investors for a variety of reasons. From access to rare earth metals, whose exports are limited by China, to admittance into growing Chinese markets, the motivations are plenty. At the same time, China’s reach abroad is becoming more and more consolidated. Today, China is the largest world exporter. It has become a key global supplier that is entrenched in very long supply chains.

Inbound FDI Grows in January

FDI small 199x300In January, the Chinese Ministry of Commerce reported an increase in inbound foreign direct investment, as foreign companies sought to do business on Chinese land. The Inbound FDI in January reached 80.63 (12.67 billion USD) billion Yuan, up from 74.94 Yuan reported in December 2017. The number of companies seeking to operate in China reached 5,197 companies in January, which is the best record in 3 years.

The high-tech sector was the one that benefited the most, as it received an increased flow of funds. The high tech manufacturing sectors industry received 93.5% more funds than in the previous year, with communication equipment and electronics getting the lion’s share of the increase. The amount invested reached 9.95 billion Yuan.

High-tech service industry also benefited as 7.35 billion Yuan were invested there. In addition, R&D, design, and information services experienced sizable increase in investments on a yearly basis. The main sources of investments include the US and Singapore, which increased their investments by at least 50%.

Businesses are encouraged to proceed with their operations on China’s land, due to the availability of cheap production inputs as well as access to thriving markets.

Measures by the Government

This increase in inbound FDI comes after the Chinese government noticed a pattern of increased outbound FDI and decreased inbound FDI, and sought to encourage investors to come to China. It released the “Notice on promotion of foreign investment growth” to alleviate constraints on foreign investments locally and introduce measures to regulate outbound FDI.

Key FDI goals for China included reducing entry barriers, developing supporting policies, fostering a better investment environment of national-level development zones by expediting approval for manufacturing companies, facilitating movement of foreign workers in and out of China, and improving the business environment in general. Steps to help this happen included producing the Catalogue for Guidance of Foreign Investment Industries, and Free Trade Zone Negative List.

These efforts have largely been fruitful as China ranks 3rd on the A.T. Kearney Foreign Direct Investment Confidence Index scoring 1.83 points out of 3, coming only after US and Germany (which moved up two ranks in 2017 from the previous year).

china foreign direct investmentOutbound FDI

Outbound FDI from China had been increasing quickly, on the other hand, and China reached the 2nd place in terms of highest outbound FDI globally. This promoted the government to develop regulations to restrict the outflow of capital and introduce restrictions.

Regulations have banned investments in industries that threaten national securities, core military technologies, gambling, and sex industries. Additionally, investments in countries at war, and investments in the real estate sector, hotels, entertainment, and sports industry, have been limited. Investments that give China competitive advantage such as in R&D centres and in high tech are encouraged.

Measures have been successful as the outflow of capital has decreased by 40.7% from 2016 to 2017. But despite this, China’s outbound FDI remains significant on a global scale, as 11% of FDI assets around the world belong to China. In July 2017, Chinese direct investment abroad reached 23 USD billion. Only the US outranks China in this regard.

investment01Despite the decline in Chinese direct investment between late 2015 and early 2017, capital outflows are expected to decrease, particularly to sectors encouraged by Chinese regulations. Significance of those investments lies in that they have the potential to alter global supply chains. Today, they account for two thirds of global trade.

This potential can be mostly seen in the infrastructure related to the Belt and Road initiative (BRI), as well as technology and know-how investments. Those investments are encouraged by the Chinese government since they give leverage to Chinese companies and the Chinese economy as a whole. Yet, they might lead to geopolitical tensions given that increased competitiveness of Chinese companies abroad will warrant measures to restrict their expansion by affected foreign governments.


China has been active in limiting capital flows to the rest of the world, and today it is attracting funds to its land with its large bond market. But although China’s regulations have limited capital outflows to the rest of the world, the effect is likely to be short-term. Essentially, regulations will most likely alter the path that capital outflows take and lead those funds to other industries, rather than restrict them. This will make the global supply chain even more dependent on China’s production. With China’s expansion in the global economy, the global financial system will also be more reliant on Chinese capital.

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