Coun­try still has in­vest­ment ad­van­tages

China Daily (Hong Kong) - - COMMENT - XIN WEN The au­thor is an ob­server of in­ter­na­tional is­sues.

Some Western me­dia, such as The Wall Street Jour­nal and The Fi­nan­cial Times, have been re­port­ing re­cently that for­eign com­pa­nies are en­coun­ter­ing trou­ble in China.

Th­ese re­ports claim that the de­mand for some for­eign prod­ucts, such as cos­met­ics and lux­ury goods, has largely de­clined be­cause of the slow­down in Chi­nese eco­nomic growth and ris­ing la­bor costs in the do­mes­tic mar­ket. Mean­while, they also blame China for pick­ing on for­eign com­pa­nies and ap­ply­ing se­lec­tive ab­sorp­tion to­ward for­eign cap­i­tal. They say for­eign com­pa­nies have dif­fi­culty op­er­at­ing their busi­nesses and some can hardly safe­guard their le­gal rights.

How­ever, such spec­u­la­tion and claims that the in­vest­ment en­vi­ron­ment in China wors­ens for for­eign com­pa­nies are twist­ing ba­sic facts and ig­nor­ing the big­ger pic­ture of China’s at­trac­tive­ness. And they could have other mo­tives.

For one thing, such sug­ges­tions can in­flu­ence the flow of in­ter­na­tional cap­i­tal, at­tract­ing cap­i­tal back to Western mar­kets. The eco­nomic re­cov­ery in the West is still built on sand, and there have been re­peated re­ver­sals. In re­al­ity, global cap­i­tal prefers emerg­ing mar­kets, es­pe­cially China. By dis­cred­it­ing the in­vest­ment en­vi­ron­ment and the prospects of in­vest­ing in China, some in the West are try­ing to cul­ti­vate new sources of eco­nomic growth and so re­vive the economies of Western coun­tries. Thus the pur­pose of at­tack­ing China’s in­vest­ment en­vi­ron­ment is to in­flu­ence and speed up the re­turn of cap­i­tal to Western coun­tries.

For another, it is aimed at dis­turb­ing the Chi­nese mar­ket and set­ting their own rules. In the past few years, the growth rates of emerg­ing economies have slowed com­pared to the high-speed de­vel­op­ment they pre­vi­ously en­joyed, but the Chi­nese econ­omy is now show­ing a strong and ob­vi­ous up­swing. Es­pe­cially as the coun­try’s lead­ers pledged to deepen re­form at the Third Plenum of the 18th Cen­tral Com­mit­tee of the Com­mu­nist Party of China held in Novem­ber. This clearly in­di­cates the econ­omy will still en­joy high growth in the fu­ture. Some Western­ers have com­pli­cated feel­ings about this.

On the one hand, they are ea­ger to share China’s eco­nomic growth bonus and in­volve them­selves in the plan­ning sys­tem; while on the other hand, they are anx­ious about the com­ing strate­gies, be­ing afraid the changes will hurt their in­ter­ests.

They have there­fore launched pro­pa­ganda cam­paigns to win over pub­lic opin­ion, deny­ing the up­beat tone of China’s in­vest­ment cli­mate and the Chi­nese econ­omy. More­over, such cam­paigns are be­ing used to force China to con­tin­u­ally grant for­eign com­pa­nies “su­per­na­tional treat­ment” in poli­cies like per­mis­sion for for­eign in­vest­ment, mar­ket com­pe­ti­tion, and gov­ern­ment pro­cure­ment.

In fact, there are many rea­sons why some for­eign com­pa­nies have seen their prof­its de­cline in China re­cently. It is not only be­cause the next wave of do­mes­tic de­mand is still wait­ing to be re­leased, but also be­cause the com­pet­i­tive­ness of Chi­nese en­ter­prises has been strength­ened and they have a big­ger share of the mar­ket now.

Gen­er­ally speak­ing, the ad­van­tages of China’s in­vest­ment cli­mate in at­tract­ing for­eign cap­i­tal are still ob­vi­ous and re­main strong, as the coun­try is trans­form­ing from re­ly­ing on low la­bor costs to­ward the com­pre­hen­sive ad­van­tages that in­clude huge mar­ket space, the qual­ity of the la­bor force, soft in­vest­ment en­vi­ron­ment, among other things.

Be­sides en­sur­ing the econ­omy’s sus­tain­able de­vel­op­ment, the on­go­ing and deep­en­ing re­forms should greatly boost the con­fi­dence of for­eign in­vestors.

First, the im­prove­ment in the qual­ity of the la­bor force has cre­ated con­di­tions for at­tract­ing high value-added and tech­ni­cal con­tent for­eign in­vest­ments. Sec­ond, the im­ple­men­ta­tion of an in­no­va­tion­driven de­vel­op­ment strat­egy and en­cour­ag­ing the de­vel­op­ment of many strate­gic emerg­ing in­dus­tries in China can pro­vide pol­icy sup­port for im­prov­ing the level and qual­ity of for­eign in­vest­ments. Third, the re­gional dif­fer­ence and mul­ti­level la­bor sup­ply can meet the dif­fer­ing needs of for­eign in­vest­ments.

The ad­just­ment of some Chi­nese poli­cies is to main­tain its ex­ist­ing eco­nomic ad­van­tages and bet­ter at­tract for­eign in­vest­ment. They will en­able China to par­tic­i­pate in the in­ter­na­tional di­vi­sion of la­bor and co­op­er­a­tion at a higher level. More im­por­tantly, it is a coun­try’s ba­sic right to pri­or­i­tize its for­eign in­vest­ments ac­cord­ing to its own de­vel­op­ment needs. China has al­ready sur­passed the stage of blindly im­port­ing for­eign cap­i­tals, and is now giv­ing pri­or­ity to ad­vanced tech­nol­ogy, man­age­rial ex­pe­ri­ence and high-qual­ity tal­ent, which are more aligned with its cur­rent de­vel­op­ment needs.

China will of­fer more op­por­tu­ni­ties to such for­eign com­pa­nies by work­ing on the im­prove­ment of its in­vest­ment cli­mate and ac­cel­er­at­ing the trans­for­ma­tion of gov­ern­ment func­tions to fa­cil­i­tate for­eign in­vest­ment.

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