Steady upswing in growth momentum makes China increasingly attractive

The better-than-expected expansion of foreign direct investment into China during the first half of the year reflects foreign investors' increasingly firm confidence in the Chinese economy, underpinned by the nation's steady economic growth upswing despite complex domestic and external conditions, according to experts and business leaders.

They also forecast that FDI into China will reach a new high in the near future, as the world's second-largest economy drives up economic growth, continuously improves its business environment and, with its effective control of COVID-19, becomes a safe harbor for FDI.

"Some people used to worry the sluggish world economy and rising protectionism would have a negative impact on the inflow of FDI into China. It turns out the impact is quite insignificant, and the FDI growth, especially compared with that in 2019, was better than expected during the first half of the year," said Huo Jianguo, vice-chairman of the Beijing-based China Society for World Trade Organization Studies.

The Ministry of Commerce reported on Wednesday that China's actual use of foreign capital surged to 607.84 billion yuan ($94.1 billion) in the first six months of the year. That was an increase of 28.7 percent year-on-year and a 27.1 percent rise over the same period in 2019.

In dollar terms, the FDI inflow during the January-June period jumped by 33.9 percent from a year ago to 90.96 billion.

"The steady upswing in growth momentum of the Chinese economy has won more confidence among overseas investors. It is natural for capital to flow into places where it can generate profits," Huo said. "Besides, China has been continuously enhancing the investment environment for foreign investors, which makes it increasingly attractive."

Such efforts include the implementation of the new foreign investment law, which enhances protection of the legitimate rights and interests of foreign investors, deepening of reforms in streamlining administration and delegating power, improvement in the overall business environment and bold trial programs in pilot free trade zones and the Hainan Free Trade Port, according to Huo.

Zhang Fei, associate director of the Institute of Foreign Investment of the Chinese Academy of International Trade and Economic Cooperation, said China has provided substantial investment returns to many foreign-funded companies, thereby contributing to world economic recovery and establishment of an open global economy.

"Pursuing higher-level opening-up, China will offer more investment opportunities for foreign investors to take part in the establishment of the new dual circulation development pattern," she said. Under China's dual circulation paradigm, the domestic market is the mainstay and the domestic and foreign markets reinforce each other.

Lars Fruergaard Jorgensen, president and CEO of Denmark-based biopharmaceutical company Novo Nordisk, said China's dual circulation development strategy provides a significant opportunity for the company to continue to enhance its presence across the whole value chain and strengthen innovation and production capabilities to fulfill the growing needs of people in China and worldwide.

Zhang Heping, head of SanofiPasteur Greater China, said the company is optimistic about the potential of the Chinese market and is expanding its investment and business presence in China.

"The Chinese government's adherence to improving the business environment and its innovation-driven strategy impresses us the most," he said.

Boost cooperation

SanofiPasteur plans to launch an innovation center for vaccines soon in the Guangdong-Hong Kong-Macao Greater Bay Area, and it expects to strengthen collaboration with Chinese governments at different levels, striving to play an effective role as a trusted partner in disease prevention, he added.

Zhang Fei, of the Institute of Foreign Investment, said data from the Ministry of Commerce also indicates improvement in the quality of China's use of foreign investment.

The actual use of foreign capital in the services sector hit 482.77 billion yuan during the first six months, growing 33.4 percent from the same period last year, according to the ministry.

For high-tech industries, FDI increased by 39.4 percent year-on-year.

Inflows of foreign capital from economies participating in the Belt and Road Initiative increased 49.6 percent year-on-year in the first half, while that from members of the Association of Southeast Asian Nations rose 50.7 percent and from European Union nations 10.3 percent.