China’s FDI rises 17.4% in H1 amid ‘capital outflow’ rumors as companies ‘dare to invest’ in streamlined market


China remains an attractive destination for global investment as the latest data showed that major economies including South Korea, the United States and Germany continued to increase their commitments to the Chinese market in the first half of this year, thereby refuting allegations of capital outflows from China to other countries. countries.

Although supply chains were disrupted in the first half of this year by the epidemic, China remained a growth engine for global multinationals, and the Chinese government is committed to making China a place where foreign companies “dare to invest”.

China’s actual use of foreign direct investment reached 723.31 billion yuan ($107 billion) in the first six months of 2022, up 17.4 percent year-on-year. In dollars, foreign investment in China increased by $112.35 billion, a gain of 21.8%, according to data from the Ministry of Commerce (MOFCOM) released on Friday.

Major economies remain glued to the Chinese market despite the fallout from the Omicron outbreaks, among other uncertainties. By source, South Korea ranked first, with growth of 37.2%, followed by the United States with 26.1% and Germany with 13.9%.

The first-half growth figure, though showing a slower pace than the first five months, is indicative of the foreign business community’s continued confidence in investing in China, experts said. .

“The data points to still buoyant foreign investor sentiment in the Chinese market, regardless of the overall global gloom. their investments to other countries like Vietnam and India,” Zhou Rong, a senior researcher at the Chongyang Institute of Financial Studies at Renmin University of China, told the Global Times on Friday.

The numbers speak volumes that China remains a desirable investment destination for global investors, Zhou said.

By category, MOFCOM said the actual use of foreign funds in high-tech industries increased by 33.6%.

Investments from South Korea and Germany have focused on high-tech areas, Chinese experts said, noting that chips and vehicles are the main areas of foreign investment. The Regional Comprehensive Economic Partnership (RCEP) also plays an important role in bilateral trade.

South Korea’s exports to China totaled $13.4 billion in May this year, while imports from China reached $14.9 billion, according to South Korean customs statistics, while experts said chip cooperation between the two countries is “inseparable”, noting that China has been the top trading partner for 18 consecutive years.

German investment in China is more focused on automation, including green economy, as Germany is the most technologically advanced in this sector in the EU, Zhou noted, expecting more cooperation. between the two countries.

BASF Coatings (Guangdong) Co announced on Thursday that it has increased its production capacity for automotive refinish coatings at its coatings site in Jiangmen, south China’s Guangdong province.

With the completion of the expansion, its annual production capacity of these products will increase to 30,000 metric tons, and the company said its environmental credentials and sustainable solutions have been well recognized by the local government.

As for U.S. investors, Tian Yun, former vice director of the Beijing Economic Operations Association, said U.S. investment in China mainly focuses on new energy vehicles and parts, as well as machinery and equipment. .

Although there have been investment outflows to Southeast Asian countries due to lower labor costs, this does not conflict with their investment plans in China, which are more about collaboration in high-tech industries and are in line with China’s innovation-driven development strategy, Bai Ming, deputy director of the Chinese Academy’s international market research institute of international trade and economic cooperation, told the Global Times on Friday.

“Thanks to the integrity of Chinese industrial chains and China’s emphasis on innovation, these high-tech investors from Europe and the United States can easily find suitable partners in China,” said Mr. Bay.

Change Photo: Xinhua

Change Photo: Xinhua

“Dare to invest”

MOFCOM attributes the growth to China’s effective coordination of epidemic prevention and economic and social development, which has brought good prospects and broad opportunities for multinational enterprises.

Investing in China means a large market with 1.4 billion people including more than 400 million in the middle-income group, solid infrastructure, comprehensive industrial support, abundant human resources and overall social stability, Chen Chunjiang said. a MOFCOM official, during the briefing. .

“China’s opening door is wider, the negative list for foreign investment access is shorter, and access restrictions are less, which provides more investment opportunities for multinational enterprises” , Chen said.

For example, China lifted the foreign ownership limit on investment in the automotive manufacturing sector, prompting automakers such as BMW, Volkswagen and Hyundai to increase their investment in China.

To improve the environment for foreign investment, MOFCOM revised or abolished 520 laws and regulations inconsistent with the Foreign Investment Law, further improving the legal environment for foreign investment.

A day before the data was released, a meeting of the Political Bureau of the Communist Party of China Central Committee was held on Thursday, which analyzed the current economic situation and organized economic work for the second half of this year. The meeting said it was necessary to create a good political and institutional environment, so that public companies dare to work, private companies dare to venture and foreign companies “dare to invest”.

“The meeting was aimed at reassuring foreign companies about the investment environment in China,” Gao Lingyun, an expert at the Chinese Academy of Social Sciences (CASS) in Beijing, told the Global Times on Friday.

Western countries led by the United States have taken political and economic measures to bring investment back into their own country or out of China, putting businesses in a dilemma. In addition, China’s aggressive zero-COVID policy has been hyped and demonized by Western media, which has also made investors hesitate, Gao said.

“It is the right time for the government to tell foreign companies that China’s investment environment will not change and China’s opening-up policy will not change,” Gao said.

Tesla's Gigafactory in Shanghai Photo: VCG

Tesla’s Gigafactory in Shanghai Photo: VCG

Revenue reports show impact

Foreign investment figures are in line with recent earnings reports from the US giants as China continues to play its role as a growth engine for their global business, although the supply chain has been affected in the first half of this year. year.

Speaking about the performance in the Chinese market over the past quarter, James Quincey, Chairman and CEO of The Coca-Cola Co, said volume was down for all months of the quarter, but the team persevered in a difficult environment and the recovery has begun. in June when most restrictions began to be lifted.

In the Asia-Pacific region, unit case volume increased 11%, according to Coca-Cola, and the company gained value share in total beverages in the ready-to-drink non-alcoholic beverage category, thanks to market share gains in China, Japan and Australia. The company said it will continue to increase investment in China’s supply chain development to drive growth potential through increased production capacity.

US electric car giant Tesla posted sales of $3.79 billion in the Chinese market in the second quarter, up $928 million year on year.

The company said the annual capacity of its Gigafactory in Shanghai is expected to surpass the 750,000 mark this year, ranking Tesla’s top factory globally. Increased exports of vehicles made at the plant have been effective in easing pressure on deliveries to markets outside the United States, he added.

Most U.S.-based companies, especially those involved in new energy vehicles, machinery and equipment, are expanding into China, eyeing the opportunity offered by the size of the Chinese market, Tian said.

Speaking at a forum on global consumer innovation at the China International Consumer Products Expo on Tuesday, Matthew Margulies, senior vice president of China operations for US-China Business Council, said China has a huge consumer market and U.S. companies are hoping for a slice of the market’s growth opportunities.

As China continues to open its doors to foreign players, more foreign fund management companies are coming to China to start their business.

With the registration of US-based Thornburg Investment as a qualifying domestic limited partnership in recent days, the number of wholly owned offshore private equity fund management companies that have completed their registration with the Asset Management Association of China hit 37, the China Securities Journal reported on Friday.

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