China News Service:
What's the situation about the inflow of FDI in recent years? What do you think about the prospect of FDI in China? Thanks.
Wang Chunying:
Direct investment reflects medium- and long-term investment intentions, and investors are more interested in the long-term development prospects of a country's economy and some of its fundamental advantages.
From a global perspective, China has always been a major destination for FDI. The COVID-19 pandemic has increased the volatility of the world economy and finance, which exerted huge impacts on the global FDI. In 2020, the outbreak of the pandemic constrained economic activity, so the global FDI plummeted. In 2021, the recovery of the world economy drove the rapid growth of FDI as it rebounded from a low position. In 2022, the global economic recovery slowed down, so did the growth of FDI, which gradually returned to its pre-pandemic level. The net FDI in BOP is calculated according to the unified international standard, which includes capital investment and earnings reinvestment. Many foreign-funded enterprises profit from their operations and may not remit all the money abroad. Many of them are optimistic about a country's economy, so the profits stay within the country and are reinvested. There are also shareholder loans, which fall into the category of direct investment. Overall, China has excelled globally in absorbing FDI, and the net inflow of FDI in China in the past decade was among the world's highest.
Speaking of prospects, what can foreign investors gain by investing in China? Foreign investors can share the investment, transformation, and market dividends of China's high-quality economic development by investing in China.
First, China's overall situation is stable, and the Chinese economy has maintained a medium-high growth in the past decade. The return on FDI in China is stable and at a relatively high level globally. Our calculations show that, over the previous five years, the return on FDI in China has been around 9.1%, while in Europe and the US around 3%. The return on FDI in emerging economies such as Brazil, South Africa, and India has been around 4% - 8%. It can be clearly seen that the return on FDI in China is among the highest.
Second, China has the world's best manufacturing capability. Its infrastructure is well-developed, and its industrial and supply chain systems are complete and stable. At the same time, the quality of the Chinese labor force is relatively high, with 240 million people having received higher education. All these continue to provide a good foundation for the innovation and development of multinational companies. Additionally, the Chinese economy is on the course of transformation into high-quality development, with new growth points springing up, such as the development of science and technology innovation and the expansion of opening up in the service sector, which will continue to attract the inflow of FDI.
Third, China has a large population, with the largest middle-income population in the world and a highly potential domestic consumer market, which provides more opportunities for foreign investors in production, sales, and services in China. Surveys by some foreign chambers of commerce and global management consulting firms, we have seen lately, show that as China's economy recovers, foreign investors are more confident in investing in China and more optimistic about its economic development prospects. We believe that foreign investors will continue to invest in the Chinese market steadily in the future.
On the policy front, China will adhere to a high-standard opening up, improve the business environment, and reduce market access to foreign investment to better serve the foreign-invested enterprises. The SAFE will continue to facilitate cross-border investment and financing and help stabilize and expand the scale of FDI. Thanks.
