The Ministry of Commerce (MOFCOM) said foreign direct investment in actual use rose 19.6% year-on-year during the January-September period. From a sectoral perspective, the services sector’s FDI increased 22.5%, while high-tech industries saw FDI jump 29.1%. FDI in the high-tech services sector grew 33.4%, while such investment in high-tech manufacturing was 15.2% higher. “The 19.6% growth in actually used FDI is satisfying overall and demonstrates that China’s business environment remains attractive to global investors amid Covid-19’s impact,” said Bai Ming, Researcher at the Chinese Academy of International Trade and Economic Cooperation. The 22.5% growth of FDI in the services sector, faster than overall FDI growth, shows that China’s services sector is becoming increasingly attractive to foreign businesses, Bai added.
China aims to become a major foreign investment destination in the world and an innovation and high end manufacturing hub in East Asia by 2035, with remarkable improvements in both the quantity and quality of foreign investment utilization, according to a new development plan for using foreign investment during the 14th Five Year Plan period (2021-25), which was unveiled by the Ministry of Commerce. The country will aim to attract a total of USD700 billion in FDI during the period. By 2025, high-tech sectors are expected to account for 30% of total foreign investment inflows, up from 29.6% in 2020. The development plan said that pilot free trade zones and ports are set to account for about 19% of total foreign investment inflows by 2025, up from 17.9% in 2020. “China is likely to attract more than CNY1 trillion of foreign investment this year, and in U.S. dollars, the foreign investment is expected to exceed USD160 billion,” Zong Changqing, Director General of MOFCOM's Foreign Investment Administration (FIA) said.
As China vows to promote opening-up in more areas and at a deeper level, the plan called for continuously expanding market access while improving the “pre-establishment national treatment plus negative list” system for foreign investment. Areas unsuitable for opening are put on a “negative list”, while foreign investors are treated no less favorably than Chinese investors at the “entrance stage”. There will be further reductions in the national, pilot free trade zone and port versions of the negative lists for foreign investment, and the country will further open up the manufacturing, services and agriculture sectors, while gradually allowing foreign investors a controlling stake or sole ownership in more areas.
The plan also called for improving the transparency of the negative lists, and strictly adhering to the principle of “no prohibition means allowing foreign investment to enter” in areas not included on the negative lists. Sectors such as telecommunications, the internet, education, culture and medical care, will be further opened, while required personnel qualifications in sectors including law and transportation will be reduced. The development plan also called for steadily promoting opening-up in financial sectors such as banking, securities, insurance, funds and futures, and steadily strengthening opening-up in the capital market, such as lowering requirements for quality foreign investors to strategically invest in listed companies.
China’s non-financial outbound direct investment (ODI) for the first three quarters fell more than 5% year-on-year to CNY522.76 billion. However, in U.S. dollar terms, the investment increased by 2.4% year-on-year to USD80.78 billion, with USD13.66 billion flowing into manufacturing – up more than 9% year-on-year – while USD6.2 billion flowed into information transmission, software and information technology services, up more than 37% year-on-year. During the first nine months, China’s investment in economies participating in the Belt and Road Initiative (BRI) reached USD14.87 billion, up more than 14% year-on-year, accounting for more than 18% of non-financial ODI, up 1.9 percentage points from the same period last year.
