40 years of foreign investment: A phenomenon that continues to grow. Only in 2019 FDI reached $96.53 billion. Is China the real champion of economic globalization?
Zhong Shang, China’s Ministry of Commerce, recently highlighted “that foreign direct investment (FDI) in the country has swelled by 6.5% year-on-year in the first three quarters”. With this data, the total amount of overseas investment in the current year has reached $96.53 billion. In September, FDI hit almost $11,21 billion, up 3.8% year-on-year. What does it mean? China is becoming more FDI friendly, a great news not only for Chinese economy.
The latest data reported that more than 30.000 new foreign-funded enterprises were established in People’s Republic during this period. Plus, investments in high-tech industries reached $28.8 billion, a 39.8% increase year-on-year, also accounting for 30% of total FDI figures. Meanwhile, investments in the country’s new free trade zones (FTZ) reached $13.4 billion, equal to 14.5% of the total FDI.
©Pixabay. Xiamen, Fujian. Historically known as the British tea trade harbor, today Xiamen is one of the busiest centers of China’s trade.
How was this growing flow of funding into the country possible? The answer could be undoubtedly be attributed to China’s opening-up policies. PRC has been continuously introducing new reforms with the intent to further bolster growth and enhance trade relations with other countries in an open, balanced, and mutually beneficial manner. And this trend has been boosted since Xi Jinping became President.
Giving an example, due to create a tending business environment and due to provide broader market access to overseas companies, China has recently launched a pilot service program focusing primarily on sectors such as finance, education and telecommunications. China has made consistent efforts to optimize its business environment and embrace investors worldwide. Last March, for example, the Chinese national legislator approved the foreign investment law, the reference legislation for foreign investments, which will come into force on 1 January 2020.
Now, almost 220 pilot tasks and 21 opening-up measures have already been launched under this program, and in 2017 the inflow of foreign capital hit $23 billion in Beijing, thanks to this program.
In addition, in March this year China intensified its efforts to open up the financial sector to overseas funding by considerably relaxing the minimum investment criteria for banks and insurance companies. Moreover, in 2013, China became the world’s largest trader of goods. Its trade’s volume in goods reached $4.6 trillion at the end of 2018, such terrific rise from just $1.1 billion in 1950. As we know, the turning point was 1978. Following the implementation of the country’s reform and opening-up policies, trade expanded by an average of 14.5% per year.
Chinese new “Great Leap” is not a surprise nowadays. Over the last four decades, China’s share in global trade also sky-rocketed from a piddling 0.8% in 1978 to a whopping 11.8% in 2018. PRC has opened almost 120 service-related industries so far, while completely relaxing several sectors such as credit ratings, accounting, e-commerce, power batteries, and railway traffic equipment in its free trade zones. Consequently, the country’s trade-to-GDP ratio in 2018 reached an impressive 38%.
Unsplash. China and the EU are ranked as the world’s two largest exporters but sit third and fifth on the table for global imports
Additionally, due to better open its market challenging the new wave of protectionism, in June the National Development and Reform Commission (NDRC) and Ministry of Commerce released two revised negative lists for 2019. The items in these lists for the pilot FTZs and the rest of the regions have shrunk from 45 to 37 and from 48 to 40, respectively.
Moreover, last year China held the first China International Import Expo (CIIE), with the goal to sign more balanced trade agreements with its trade partners by increasing import volume and providing overseas firms greater market access. By launching this expo, China also aims to bring vitality to both regional and global economic growth through free trade networks and cooperation with other nations. Even big economies such as Italy, France or Germany attended the appointment. On the global stage, China is a real champion of economic globalization.
This year, the seco CIIE is to be held from November 5 to 10 in Shanghai. More than 3,000 companies from 150 countries and regions already have been registered for the event, a significantly higher figure than last year’s participation.
The addition to the second CIIE of new sections such as virtual and augmented reality, autonomous driving, the internet of things and blockchain technology has led to a 10% larger exhibition area of around 300,000 square meters. At the first CIIE, Beijing set the long-term goal of importing more than $30 trillion worth of commodities and $10 trillion worth of services in the next 15 years.
Taking in past actions and the current scenario together with future projections, China can be expected to forge stronger trade links with nations across the world, continuing to create an environment of win-win cooperation through its continued reform and opening-up policies. 40 years have passed since the first foreign company decided to invest in China. Since then, without a doubt, Chinese economic development has been closely linked to investors from abroad. Determined to safeguard free trade and integrate into economic globalization, China will continue its successful cooperation with investors around the world boosting open-door policy.