Business China

A Look At The Growing Foreign Direct Investments in China and Opening-Up Measures

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Foreign Direct Investment (FDI) is one of the key benchmarks for evaluating a country’s economic growth and future potential. Numbers gathered by the Chinese government and outside sources indicate that for China, the FDI has increased by more than seven percent in the first seven months of this year.

Here are some interesting numbers regarding the FDI in 2019:

  • More than 24,000 FIEs have been set-up in China between January and July
  • The FDI growth rate in the first six months was 7.2 percent. The inflow grew from 3.5—in the first half of the year—to 3.6 percent year-on-year to over 80 billion USD
  • In July alone, the FDI grew to over 8.7 percent compared to the 8.5 in June 
  • The high technology sector saw the most growth in terms of capital flow, where investment rose to over 43 percent year-on-year and accounted for nearly 30 percent of the overall FDI
  • In the high-tech service sector, the inflow spiked to over 63 percent year-on-year while in the manufacturing sector, the year-on-year increase was at 19 percent.

These numbers show that despite the trade war and flailing conditions of the global economy, China is still a popular investment destination for foreign investors. 

The steady growth has been attributed to China’s updated and newly introduced reforms aimed to attract overseas companies and allow more investment opportunities for businesses setting-up in China.

setting up a business in China-

Measures taken to attract further investments

From passing a new foreign investment law to making changes in the value-added tax rates, overseas companies are better facilitated now more than ever in China. In the past, the country’s strict entry laws, hundreds of industries on negative lists and complicated ownership structures have limited the ability of foreign entrants to enjoy the same treatment as their domestic counterparts; but now things are changing.

  • Recently, China announced that it would scrap foreign investment quotas on the dollar-dominated investor scheme—qualified foreign institutional investor (QFII)—so foreign investors can conveniently access the financial market. The move would also make China’s stock markets more accepted in the international economy
  • The foreign investment law introduced back in March will go into effect on January 1st, 2020 and aims to ease concerns regarding forced technology transfer and the treatment by the government regarding procurement and market access.
  • Further sectors have been added to the positive list in the Encouraged Catalogue, which allows FIEs to get preferential treatment

Surveys conducted by multiple research and consultancy firms shows that foreign investors are hopeful about the growing economy and its future standing in the global financial markets.

If you’re thinking of investing or setting up a business in China, email us your proposal to get started.

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