Attraction remaining

The World Investment Report 2016 released by the United Nations Conference on Trade and Development shows that globally, China remains the second most attractive destination for FDI. Its booming services sector, high-end manufacturing, innovation sector and its western region are showing lucrative prospects.

According to China’s National Bureau of Statistics, consumption contributed 64.6 percent to China’s economic growth in 2016. The output of the services sector totaled 38.4 trillion yuan ($5.6 trillion), making up 51.6 percent of the total GDP.

Despite the slow growth of inbound FDI in other sectors, foreign capital is sensitive to the booming services sector in China. In 2016, FDI in China’s services sector accounted for 70.3 percent of the total FDI in all sectors, reaching 571.58 billion yuan ($83.2 billion), a year-on-year increase of 8.3 percent.

“Foreign capital is attracted by the lucrative potential of China’s services sector. With the country upgrading its economic structure, the momentum for the growth of the services sector will remain robust in the future, especially modern services sectors involving technology and information,” said Li Dawei, a researcher from Academy of Macroeconomic Research with China’s National Development and Reform Commission. He is confident that more foreign businesses will invest in this sector as China improves its business environment and loosens restrictions on the entry of foreign capital.

With the Belt and Road Initiative, infrastructure and connectivity in China’s western region are improving. “The huge untapped market potential in the western region of China will be a sustained impetus for foreign businesses,” said Hao.

Experts believe opportunities produced by urbanization are also attractions. “Promoting urbanization will create an even greater market, of which foreign businesses can have a share,” said Li.

According to Li, to increase the attraction, cities in the western region should work together and cultivate powerful industries that can promote the emergence of supporting industries as well as economic progress of the region as a whole. “A better and fairer business environment supported by favorable policies and improved infrastructure is also needed,” said Li. Comments to houweili@chinafrica.cn