BIZINSIGHT

Global Times US Edition - - BIZCOMMENT - By Huang Ge

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.

Pos­i­tive ad­just­ments

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.

At­trac­tive mar­ket

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.

Photo: GT

Of­fi­cials and ex­perts from China and abroad at­tend the Global Times Leader Roundtable meet­ing held in Bei­jing last Tues­day.

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