Business China

New Changes in the Structure of Foreign Investment: the Rush of High-end Manufacturing and Services

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New changes in the structure of foreign direct investment (FDI) in China are accelerating into the fields of high-tech manufacturing and high-tech services.

In the first nine months of this year, 23541 new foreign-invested enterprises were established in China, up 10.6% year on year, according to the Ministry of Commerce. The actual use of foreign capital was 618.57 billion yuan, up 1.6 percent year on year. In September, 3152 new foreign-invested enterprises were established in China, up 14.5% year-on-year. The actual use of foreign capital was 706.3 billion yuan, up 17.3 percent year on year.

Industry experts have told reporters that while foreign investment in low-end manufacturing is indeed leaving, foreign capital in the high-tech manufacturing and services sectors is pouring in more.

Foreign capital enters new business state new industryAt a seminar jointly organized by the China international economic exchange center (hereinafter referred to as the national center for international economic exchange) and the national high-end think tank of Xinhua news agency, experts at the conference gave an unacknowledged answer to the notion that "foreign capital is leaving China".

"If you look at monthly, quarterly growth rates, FDI growth is down, but it's just a symptom." Zhang jianping said, a researcher at the Ministry of Commerce, the vast majority of foreign capital leaving is from labour-intensive and partly capital-intensive industries. "Twenty years ago, 70 per cent of foreign investment was in manufacturing, and only 30 per cent in services. Today, the structure is reversed." In zhang jianping's view, the FDI structure has seen a good change: Between 65 and 70 per cent of foreign investment is in services, and almost 30 per cent in high-end manufacturing.

Lu Jinyong, director of the center for FDI studies at the university of international business and economics, said that in terms of overall size, foreign investment still comes. FDI is growing, though a bit low, is still growing. Especially in the service sector, there is more foreign investment in the high-tech sector.

According to statistics, in the past September, the actual use of foreign investment in high-tech manufacturing industry was 5.29.8 billion yuan, a year-on-year increase of 27.5%. The actual use of foreign investment in high-tech services was 91.59 billion yuan, up 24 percent year on year.

"Foreign capital is actually starting to get into the emerging world."
According to Zhang Yansheng, chief researcher of the national center for economic research and development, the growth of foreign investment in traditional fields has been slower, so the total amount is lower. But the structural changes behind it show that new businesses and new industries are growing.

The investment environment has been improvingChina's investment environment has been improving gradually, according to the report of the national research group.

In terms of market access restrictions, China's market access restriction index compiled by the OECD has steadily declined since 1997. In terms of policy support, China's special restrictions on foreign investors have decreased from 93 items in the 2015 edition of the catalogue of foreign investment industry guidance to 63 in 2017.

In addition, in terms of fair competition market environment improvement, China is speeding up the reform of the land management system, the credit management system and the energy management system, so that the market mechanism can play a decisive role in the allocation of resources.

"China's growing use of foreign capital is the best footnote to improving the business environment in China." 'China's business environment and regulatory environment have improved,' Mr. Zhang said, according to a white paper released by the U.S. chamber of commerce in China this year. 90 percent respondents said China had improved its enforcement of intellectual property rights over the past five years.

Mr Zhang argues that foreign complaints are largely due to the lack of access to high-tech services and high-tech manufacturing companies. He said how to stimulate our emerging industries through further market access and openness should be an important issue that needs to be addressed in the future.

Attracting foreign capital still needs to be boosted'The huge growth potential of China's economy in the future will be the most important factor for the continuous absorption of foreign investment,' Mr. Zhang said. He says there are projections that China will form a middle class of 500 million to 600 million people in the future. This is approximately the total population of the 10 Asean countries, or the total population of Latin America, the middle class has the highest marginal propensity to consume.

"A lot of the capital flows are designed to be close to the consumer market, so the Chinese market is a very important destination for them." "Zhang said.

"We need to maintain the growth of foreign investment. In manufacturing, we should increase the appeal of foreign investment in the central and western regions. In the service sector, we should continue to deepen reform and replicate the relevant experience of the free trade area. "Said Pei Changhong, a researcher at the economic research institute of the Chinese academy of social sciences.

Lu Jinyong believes that the capital increase should also focus on the three aspects of the work, including the merger of the current multipart foreign investment law as a foreign investment law as soon as possible, we will quickly merge the four existing guidance directories on foreign investment industry and make innovations in the use of foreign capital.
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