China’s foreign direct investment (FDI) structure continued to improve in 2023, with 37.4% of FDI going to high-tech industries, up 1.3 percentage points from 2022, reaching a record high, according to Chinese Commerce Minister Wang Wentao. In the manufacturing sector, the share of FDI increased by 1.6 percentage points to 27.9%. There is stability in the Chinese market and its economic potential from foreign investors as they continue to increase their investments or operations in the country.
Data from the Ministry of Commerce showed that China’s actual FDI in 2023 reached more than 1.13 trillion yuan (about 158.89 billion US dollars). This figure remains the third highest in history. In terms of major sources of FDI, Canada, UK, France, Switzerland and the Netherlands increased their investments in China in 2023. The number of new foreign-invested enterprises established in China by the EU, US and Japan has also increased.
The number of newly established foreign-invested enterprises in China rose to 53,766 last year, up 39.7 percent from 2022. For example, Airbus opened a service center in Chengdu in January dedicated to the entire life cycle of an aircraft, which has become the company’s first such center outside of Europe. Also, data from fast food chain KFC shows that the number of its stores operating in China has grown to more than 10,000 as of December 2023.
A survey by the European Chamber of Commerce in China found that about 59 percent of companies surveyed view China as one of their top three investment destinations.
Direct investment by German companies in China reached a record amount of nearly 12 billion euros (about $13 billion) last year, according to a report by the German Economic Institute based on data from the Bundesbank. It shows the world’s second-largest economy is looking to expand, even as the European Union tightens controls on that investment. The share of investment in China in total German direct investment abroad rose to 10.3% last year, the highest level since 2014, the report said.
At two sessions this year, the Chinese government set the economic growth target at about 5 percent for 2024, which is in line with the goals of the 14th Five-Year Plan for Economic Development (2021-2025). According to Premier Li Qiang, the government took into account when setting the target, the need to increase employment and income, as well as prevent and reduce risks. Peking University professor Zhou Lian said setting such a goal would help boost trust, meet public expectations and further build consensus on development issues. By comparison, China’s economy grew by 5.2 percent in 2023, with corresponding economic growth exceeding 6 trillion yuan (about $845.33 billion) at constant prices. To achieve this volume, increase 10 years ago would have required a 10 percent annual GDP growth rate.
Today China has many advantages for economic development, such as a vast market, a complete industrial system, a huge and highly skilled workforce and a growing potential for scientific and technological innovation.
As a major manufacturing hub, China boasts all industrial categories listed in the UN industrial classification, and its manufacturing value added accounts for 30 percent of the global total. It is the second largest consumer market in the world and the largest online retail market. The presence of quality factors also serves as a buffer against shocks.
A series of reform measures have also added impetus and vitality to economic growth. The country has placed the development of new high-quality productive forces at the top of its agenda.
To actively attract foreign investment and improve the business climate, the “Year of Investment in China” events and a number of events on international cooperation in the field of investment and production were launched. Assistance was provided in the entire process of implementing landmark projects with the participation of foreign capital.
The construction of platforms for opening up to the outside world has been comprehensively promoted. The strategy to improve the level of pilot free trade zones has been intensively implemented, and work has been carried out in Shanghai and other pilot free trade zones to harmonize high-standard domestic and international trade and economic rules to expand openness at the institutional level. The Xinjiang Pilot Free Trade Zone was established. More than 170 new experimental measures have been adopted to support Beijing in stepping up the construction of the national comprehensive demonstration zone for expanding opening up in the service sector. The new land-sea intermodal transport corridor in western China has expanded its coverage to 70 cities in 18 provinces (autonomous regions and municipalities), connecting China to 486 ports in 120 countries and regions.
According to the draft Economic and Social Development Plan, which was presented by the State Development and Reform Committee of the People’s Republic of China on March 5, 2024 at the 2nd session of the 14th National People’s Congress of China, it is proposed to improve the quality and level of trade and investment cooperation. To achieve this, measures are proposed for the integrated development of domestic and foreign trade. In particular, it is proposed to completely abolish measures limiting the access of foreign investment to the manufacturing industry and expand access to the market of telecommunications, medical services and other service sectors. We will continue to make efforts to build a first-class and internationalized business environment that operates on the basis of market principles and the rule of law, creating the brand “Investing in China”.
In addition, a new batch of landmark projects involving foreign capital is expected to be unveiled in due course. Further work remains to be done to create conveniences for mutual travel between Chinese and foreign personnel, effectively remove restrictions and obstacles in the work, training and tourist trips of foreign citizens in China, improve payment services, and intensively promote the restoration of international flights. Also, it is planned to in-depth implement the strategy of increasing the level of pilot free trade zones, to provide pilot free trade zones, the Hainan Free Trade Port and others with greater rights to independent activity. Thus, by reforming and improving the zone management system, it is even better to exploit their role as investment attraction platforms.
All this indicates that the Chinese economy has powerful potential, and China has all the resources to maintain growth and further development.
The China studies Centre
