Five industries – auto-making, food processing, pharmaceuticals, chemicals and consumer goods – now account for nearly 70% of all European direct investment in China, up from 65% in previous years. “There is speculation that Europe will enter an era of elevated energy cost, and some companies with high energy consumption will need to move their operations overseas, and China's energy supply is definitely more stable than Europe's, and for those companies, production in China is also closer to their target market,” Cui Hongjian, Director of the Department of European Studies at the China Institute of International Studies, told the Global Times.
A recent study by Institut der Deutschen Wirtschaft found that German investment in China amounted to €10 billion in the first half of 2022, far exceeding the previous half-year peak since the turn of the millennium of €6.2 billion. Chinese Ministry of Commerce data show that German investments in China increased by 23.5% year-on-year in the first seven months of this year.
Companies doing cross-continental business are shifting the focus of their supply chains from Europe to China due to increased costs and energy shortages in Europe. Due to geopolitical factors, many European companies are now transferring orders from local factories to Chinese suppliers, or simply building their own factories in China, which has been resilient despite global turbulences, industry insiders said. Some Chinese businesspeople said that orders from European clients jumped by 20% this month. The trend is particularly evident in energy-intensive and high-tech sectors such as organic chemicals, electronic and mechanical equipment and auto parts, which industry insiders said may boost China's role as the world's manufacturing hub. “Demand from Europe is indeed increasing. There are no official data yet, but I estimate demand grew more than 20% in September year-on-year – mainly NEVs and lithium batteries,” Tommy Tan, President of Shanghai EPU Supply Chain Management Co, an agent for the China-EU freight train service, said.
Foreign direct investment (FDI) in the Chinese mainland expanded 16.4% year-on-year to CNY892.74 billion in the first eight months of this year, data from the Ministry of Commerce showed. Backed by a complete industrial system, a massive market and social stability, China has created a solid foundation for the growth of foreign-funded companies despite challenges that are threatening the global economic recovery, said Wang Wen, Executive Dean of the Chongyang Institute for Financial Studies, which is part of Beijing-based Renmin University of China. “As Chinese companies have leapfrogged ahead of many global businesses in newly emerging fields like electric vehicles, cross-border e-commerce, artificial intelligence and green development, foreign players also wish to partner with them to seek more growth points,” he said. China’s services sector received CNY662.13 billion in foreign investment between January and August, up 8.7% year-on-year, while FDI in high-tech industries surged 33.6%.
FDI in China’s eastern region grew by 14.3% year-on-year during the January-August period. The corresponding figures for the central and western regions are 27.6% and 43% respectively. The foreign trade value of foreign-funded companies in China rose 2.4% year-on-year to CNY9.17 trillion between January and August, accounting for 33.6% of China’s total trade value, according to the General Administration of Customs. Attracted by China’s lucrative market, FDI from the Republic of Korea grew 58.9% year-on-year in China in the first eight months, while investment from Germany and Japan climbed 30.3% and 26.8%, respectively.
EU companies' investment in China soared in the first eight months of 2022. According to China's Ministry of Commerce, EU's FDI inflow into China jumped 123.7% year-on-year from January to August.
