Chinese investment seeks win-win progress
At a time when the global economy is in the doldrums, many eyes are on China, the world’s second largest economy and soon-to-be one of the biggest cross-border investors, for growth opportunity.
Despite moderation of growth, China remains one of the fastest-growing and most resilient major economies in the world. Its GDP grew by 6.7% in the first half of this year, 2.8 times of the worl%d average, contributing 26% to global growth. Registered urban unemployment rate has stayed around 5%. Household income increased by 6.5%, while the income gap between urban and rural residents has been further reduced. The fundamentals of the Chinese economy are proven to be strong, leaving sufficient latitude for Chinese policymakers to respond effectively to potential headwinds facing the economy.
The ongoing reforms in China designed to carry the economy steadily through a tough transition toward more sustainable and quality growth are producing good results. A central component of those reforms is supply-side structural reform. The goal is to transform China’s economy into one driven by innovation and consumption and make it healthier and more efficient. Initial progress has been achieved in cutting over-capacity, reducing inventory, deleveraging, lowering costs and strengthening weak links. Figures in Q1 and Q2 show that production of the top six energy-intensive industries is on decline, and over-capacity of crude steel and coal were cut by 13.85 million tons and 72.27 million tons respectively. China’s industrial structure has improved significantly, with the services sector overtaking the manufacturing sector and accounting for 54.1% of GDP. Hi-tech and equipment manufacturing industries grew by 10% and 8% respectively. There is no doubt that the structural reforms taking place in China will upgrade its economy and send a message of hope and opportunity to the world.
For over a decade, China has been actively pursuing closer economic ties with other countries under the “win-win strategy of opening-up”, a policy framework to assure the world that China will become more open economically and seek cooperation which benefits both sides. Following its accession to the WTO, China launched the “Go Global” strategy in 2001. Since then, overseas investment by Chinese businesses has grown more than 20 folds. By the end of the first half of 2016, Chinese non-financial overseas direct investment totaled US$ 88.86 billion, an increase of 58.7% year on year, going into more diverse sectors. New foreign project contracts totaled 99.69 billion US dollars, an increase of 15% year on year, of which 51.6% are signed with 61 countries along the Silk Road Economic Belt and the 21st Century Maritime Silk Road, known as the Belt and Road Initiative, an increase of 37% compared with the year before. Data from Dealogic, an international financial data supplier, shows that China has risen to No.1 in global cross-border mergers and acquisitions with 30% of the international M&A deals from January to March this year.
According to the 2015 Report on the Sustainable Development of Chinese Enterprises Overseas jointly released by the United Nations Development Program and two Chinese think tanks, Chinese enterprises’ “going global” has given a huge boost to economies worldwide. Chinese investment is welcomed by the recipient countries, because it brings not only business opportunities, but also improved livelihood to local communities. By receiving Chinese investment, foreign countries have the resources to bridge financing gaps, upgrade infrastructure, create new jobs and thus better grow their economy. According to Qian Keming, Vice-Minister of Commerce of China, in 2014, Chinese companies paid US$19.15 billion worth of tax to their host countries and hired 833,000 staff locally. For host countries, Chinese investment means opportunity, not challenge. The Belt and Road Initiative is yet another effort championed by China to boost global business cooperation. Since it was launched three years ago, the initiative has gained enormous traction. Opportunities are pouring in to not just China, but all countries along the routes and open to the initiative. More than 70 countries and organizations have joined the initiative. Bilateral trade between China and participating countries has topped one trillion US dollars. China’s direct investment in 49 participating countries is near 15 billion US dollars, an 18% increase yearon-year. China has signed production capacity cooperation agreements with 20 participating countries, and set up 46 overseas cooperation zones with 17 participating countries, which brought 60,000 local jobs.
As friendly countries, China and Malta have had fruitful cooperation over the years. The No.6 Dry Dock built in the 1970s is a showcase of a friend in need and was called a “treasure trove” by the Maltese, and the Mediterranean Traditional Chinese Medicine Center has offered treatment to more than 140,000 local people. In recent years, some of China’s leading companies, e.g. Shanghai Electric Power and Huawei have either entered the Maltese market or are having discussions with Maltese counterparts. With their state-of-the-art technology, they want to be Malta’s partners in job creation, industrial upgrading and environmental protection.
The Belt and Road Initiative has offered broad prospects for cooperation between China and Malta. We will encourage more Chinese enterprises to come to Malta and seek mutually-beneficial cooperation opportunities with their local partners. This will serve the need and interests of both sides and bring about a truly win-win situation.