Foreign direct investment (FDI) has figured China’s economic growth in the past four decades and is likely to benefit the country more in the future, experts said.
The economic impact of FDI, the operations of foreign-invested enterprises (FIE) and the multiplier effects realized through FIE supply chains and their labor costs were equivalent to 33 percent of China’s GDP and 27 percent of China’s employment from 2009-13, Michael J. Enright, professor of the School of Business at the University of Hong Kong, told the Global Times on Tuesday.
China has made step-by-step progress in opening up its economy to foreign investors, which has also facilitated the country’s economic transformation and upgrading, experts said.
These comments came from a group of Chinese and foreign officials and experts and representatives from multinational companies who gathered in the latest session of the Global Times Leader Roundtable meeting held in Beijing on Tuesday. The meeting oversaw discussions on the impact of past, present and future FDI on China’s economy.
The event was jointly organized by Global Times and North Head, an associate with the Hinrich Foundation.
But meeting attendees also raised concerns that some sectors in China are still less open and less experienced than in other economies, such as services, logistics and finance, and noted that China is expected to further lower the threshold for foreign capital.
China’s economy is currently in more need of foreign investment than in any previous period, Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges (CCIEE), said at the meeting.
The structure of foreign capital has changed during the past four decades. Before 2005, foreign investors coming to China were driven by low costs. But after 2012, foreign capital has become efficiency-driven, Zhang said, noting that foreign investment has increased in recent years in such sectors as modern services, advanced manufacturing and modern agriculture.
China should improve its innovation ability and efficiency when seeking economic transformation and upgrading, and cooperation with foreign companies would help with this, according to Zhang. Foreign and Chinese officials as well as experts and representatives from multinational enterprises gathered in Beijing last Tuesday to discuss the impact of foreign direct investment (FDI) on China’s economic growth. Participants said that China has benefited from FDI over the past years because foreign companies can help the nation achieve its development goals and carry out major initiatives. The Chinese government has endeavored to further open up its markets through efforts like introducing national guidelines to aid foreign investment. Foreign capital could also help the construction of the China-proposed Belt and Road initiative, experts noted.
Experts said that the Chinese government is beefing up efforts in improving the country’s business environment and many profound changes have already taken place in 2017.
On June 28, China’s National Development and Reform Commission along with the Ministry of Commerce (MOFCOM) released the 2017 version of the “Catalogue for the Guidance of Foreign Investment Industries.”
The new catalogue has introduced a national “negative list” to guide foreign investment and has cut the number of special administrative measures restricting foreign investment from 93 to 63, compared to the 2015 version.
In October 2016, the MOFCOM shifted from an approval system to a record-filing system in order to better integrate FIEs into the Chinese market.
China’s determination and resolution to reform and open up the market has not changed, but has rather become stronger and clearer, an official with the MOFCOM told the meeting.
The MOFCOM will make joint efforts with relative departments to analyze problems raised by foreign investors, aiming to further enhance and create a better business environment.
First-half FDI inflow reached 441.54 billion yuan ($65 billion), easing 0.1 percent on a yearly basis, according to data released by the MOFCOM on July 13. The number of new foreign-funded companies rose 12.3 percent to 15,053 during this same period.
“China is a huge market and German companies are willing to come here to share knowledge,” Hanna Mueller, chief representative of China matters at the Federation of German Industries, told the meeting.
“The Chinese market is attractive to Indian companies and more cooperation is expected between the two nations in sectors including information technology and pharmaceuticals in the future,” Atul Dalakoti, executive director of the Federation of Indian Chambers of Commerce and Industry, told the Global Times on Wednesday.
Atul said that in a bid to tackle rising rivalry with foreign companies, Chinese ones are expected to enhance competitiveness by developing their own brands or creating their own patented products and to develop advanced industries instead of focusing on labor-intensive industries.
Experts at the meeting said that foreign investors that seek growth in the Chinese market need to learn more
B&R initiative call
Foreign capital plays an essential role in the China-proposed “Belt and Road” (B&R) initiative, experts at the meeting said.
Some of the world’s largest multinational firms have vast experience in the roughly 70 countries and regions covered by the B&R initiative, but there are relatively few Chinese enterprises that have that sort of global experience, said Enright.
There are still relatively few Chinese companies that have massive global networks, Enright continued.
“Trying to coordinate and communicate across the B&R routes still pose enormous tasks and challenges, especially with regard to logistics, technology and communications,” according to Enright.
An example of how to tackle these problems would be if foreign companies closely worked with and partnered with inexperienced Chinese companies in countries and regions along the B&R routes, noted Enright.
As the initiative was proposed by China and Chinese companies generally do not have a high level of international experience, it is essential that foreign companies become involved in the B&R initiative to ensure its success, said Enright, who recently published the Chinese-language edition of his book “Developing China: The Remarkable Impact of Foreign Investment” in Beijing.
Enterprises from Germany have shown great interest in the initiative and also hope to cooperate with Chinese companies on some projects, said Mueller, the aforementioned German chief representative.
“But we don’t have the contacts for some projects on the Chinese side,” Mueller said.
She noted that the Chinese side is expected to provide more information to German firms and more communication is needed between companies of the two countries.
To summarize these matters, John Russell, the managing director at North Head, noted that, “overall, the impact of FDI has been positive in the past for accelerating China’s economic development.”
“It remains relevant, but now FDI needs to adapt to China’s future needs, through, for example, supply-side transformation, promoting greater innovation and realization of the B&R Initiative,” according to Russell.
Officials and experts from China and abroad attend the Global Times Leader Roundtable meeting held in Beijing last Tuesday.