In­vest­ment on track in first half FDI sta­bi­lized and ODI cur­tailed as na­tion im­proves its port­fo­lio

China Daily (Hong Kong) - - FRONT PAGE - By ZHONG NAN and WANG YU

For­eign direct in­vest­ment into China sta­bi­lized in the first half of 2017, and the na­tion’s out­bound direct in­vest­ment took a nose­dive as au­thor­i­ties curbed ir­ra­tional deals and fine-tuned the in­vest­ment port­fo­lio, Min­istry of Com­merce of­fi­cials said on Thurs­day.

FDI in China rose by 2.3 per­cent year-on-year in June to 100.45 bil­lion yuan ($14.82 bil­lion). Dur­ing the first six months, the in­flow stood at 441.54 bil­lion yuan, down by 0.1 per­cent, the Min­istry of Com­merce said on Thurs­day.

Non­fi­nan­cial out­bound direct in­vest­ment fell by nearly half in the first six months of 2017 as curbs took ef­fect over cap­i­tal out­flows deemed by reg­u­la­tors to be ir­ra­tional or il­le­gal.

Gao Feng, the min­istry’s new spokesman, said the slump in ODI was a re­sult of an op­ti­mized port­fo­lio of out­bound in­vest­ment, plus a high com­par­i­son ba­sis from last year.

China had al­ready taken mea­sures to pre­vent un­wise and il­le­gal over­seas in­vest­ment by State-owned en­ter­prises, espe­cially in real es­tate, ho­tels, sports and en­ter­tain­ment busi­nesses. This year, the coun­try may in­tro­duce its first reg­u­la­tion on ODI to bet­ter over­see the sec­tor and fend off po­ten­tial cases of ir­ra­tional in­vest­ment and money laun­der­ing, cen­tral gov­ern­ment of­fi­cials have said.

Gao said the FDI vol­ume was ba­si­cally sta­ble in the first half, and the in­vest­ment struc­ture was fur­ther op­ti­mized and im­proved.

China’s man­u­fac­tur­ing sec­tor at­tracted 128.6 bil­lion yuan in for­eign in­vest­ment in the first half, up 3 per­cent year-on-year and ac­count­ing

for 29.1 per­cent of the to­tal FDI. High-tech man­u­fac­tur­ing espe­cially ben­e­fited, with its FDI re­main­ing ro­bust be­tween Jan­uary and June, grow­ing 11.1 per­cent year-on-year to 34.97 bil­lion yuan.

In the ser­vice sec­tor, FDI reached 309.99 bil­lion yuan, ac­count­ing for 70.2 per­cent of the to­tal.

“For­eign com­pa­nies are in­clined to in­vest in China’s high-end and con­sumer-ori­ented man­u­fac­tur­ing and ser­vice busi­ness, as they are grad­u­ally mov­ing low-end fac­to­ries and heav­ily pol­lut­ing busi­nesses to other emerg­ing mar­kets,” said Daniel Starta, man­ag­ing di­rec­tor for China of the US-based con­sult­ing firm AT Kear­ney.

From Jan­uary to June, the num­ber of newly founded for­eign com­pa­nies rose by 12.3 per­cent year-on-year to 15,053, ac­cord­ing to the min­istry.

In a re­port that the Amer­i­can Cham­ber of Com­merce Shang­hai re­leased on Wed­nes­day, about 77 per­cent of US com­pa­nies sur­veyed re­mained prof­itable and 73.5 per­cent of com­pa­nies re­ported rev­enue growth in China in 2016.

Forty per­cent of re­spon­dents said they thought that the US gov­ern­ment should use in­vest­ment rec­i­proc­ity as a tool to gain US com­pa­nies greater mar­ket ac­cess to China.

“FDI to China is likely to re­main sta­ble in the sec­ond half of this year as for­eign com­pa­nies are re­al­iz­ing that China’s grow­ing mid­dle class will have higher lev­els of dis­pos­able in­come and that the coun­try is shift­ing to a pro­duc­tiv­ity-driven growth model,” said Wang Zhile, a se­nior researcher on for­eign in­vest­ment at the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion.

To at­tract more FDI, China will re­lease the 2017 Cat­a­log for the Guid­ance of For­eign In­dus­tries to of­fer more fa­vor­able poli­cies and fur­ther im­prove the mar­ket en­vi­ron­ment for global com­pa­nies by the end of this month, said Gao, of the Com­merce Min­istry.

John­son Con­trols Inc, a US-based man­u­fac­turer of con­trol sys­tems and bat­ter­ies, started the operation of its sec­ond global head­quar­ters last month in Shang­hai. The fa­cil­ity, to bet­ter co­or­di­nate its busi­ness in the Asia-Pa­cific re­gion, has a ca­pac­ity for 1,600 em­ploy­ees, the com­pany said.

Ger­man mo­bil­ity, in­dus­trial and soft­ware con­glom­er­ate Robert Bosch GmbH also

FDI to China is likely to re­main sta­ble in the sec­ond half of this year.” Wang Zhile, researcher at Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion

opened a plant for its au­to­mo­tive elec­tron­ics busi­ness di­vi­sion in Changzhou, Jiangsu province, in April. The in­vest­ments in this plant will reach $118 mil­lion by 2019, with more than 1,300 as­so­ciates to be em­ployed.

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