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New effective measures give fresh impetus to foreign investment

By Hao Hongmei | China Daily | Updated: 2021-02-24

In the context of China's utilization of foreign direct investment this year, stabilizing the scale and improving the growth level will be the main tasks.

With the impact of the COVID-19 pandemic and declining global economy pushing China to accelerate its economic reforms, the country introduced a number of effective policies to stabilize foreign investment last year.

These included continuing to increase the degree of openness in the financial sector and other fields, and expanding two-way exchanges in intellectual property and other high-tech fields. The dividends released by these policies will gradually appear this year.

The International Monetary Fund has said the Chinese economy is expected to achieve a relatively high growth of about 8 percent this year. So, there is still more growth potential for both investment and market demand in China.

This is expected to create new space for international cooperation, including promoting the transformation and upgrading of traditional manufacturing businesses, speeding up the development of emerging industries, upgrading the services sector and building strategic pillar industries.

Moreover, a series of promotion moves will generate fresh impetus to attract foreign investment. Such moves include high-quality growth of pilot free trade zones, innovation, upgrading projects within State-level economic development zones, more policy access regarding mergers and acquisitions for global companies, improvement of business environment, and creation of a new growth pole for opening up the country's western region. Therefore, the new round of opening-up in China this year will create more room for FDI growth.

As far as industry is concerned, the on-schedule completion of the bilateral investment agreement negotiations between China and the European Union has showed both sides' commitments to offering each other high-level and mutually beneficial market access in enriching trade and investment activities.

The US government under Democratic Party's leadership may also ease the economic and trade tensions with China, indicating the cooling of irrational trade frictions will be beneficial to investors. These elements, to a great extent, will help restore confidence in investing in China's manufacturing and innovation sectors this year.

Other businesses such as new energy vehicles, biomedicine, smart manufacturing, healthcare, education and training, as well as other high-tech industries, are all expected to become the focus areas for foreign investment this year.

Even though the utilization of foreign capital in China's central and western regions will increase, the structural problems, or the gap in FDI attracted by the eastern and western parts, will not change fundamentally due to the integrity of the industry chain and the size of consumer base in central and western regions.

However, with these regions' new competitive edge in lower costs like labor and power, the FDI gap will likely gradually narrow in the future.

Because China's utilization of foreign capital is still facing challenges, the government needs to pay particular attention to a number of areas. In addition to continuing to expand the high level of opening-up to the outside world, China needs to watch moves made by the new US government closely and make its own policy response in advance.

Japanese and South Korean companies that invested in China have found that they are yet to achieve market shares for their products to the desired level. They will see there is still a huge room for growth in the future.

Backed by its massive market size, infrastructure and favorable policy environment, China will remain as a core investment destination for Japanese and South Korean companies in Asia.

On the other hand, China should also strive more to attract more FDI from these two manufacturing powerhouses in the future.

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