Investment
Mar 07, 2016 ｜ by
Investment
Edited by Xu Yuanyuan
On February 17 2016, Ministry of Commerce held the regular press conference, and its spokesman Shen Danyang responded to investment drawing high levels of concern from domestic and overseas media. The veritable records are as follows:
Foreign Investment in China
In January, the size of foreign investment in China sustained a steady growth and the utilization of foreign capital was further improved. The characteristics of foreign investment in China are presented as follows:
· The actual utilized FDI sustained steady growth. In January, a total of 2008 newly-established foreign-invested enterprises were approved, going down 11.4% year on year. The actually utilized foreign capital reached RMB 88.25 billion, up 3.2% year on year (excluding the data of bank, security and insurance, the following are the same).
· The investment from major countries and regions maintained a steady growth. In January, the actually utilized FDI from the top ten countries and regions totaled RMB84.38 billion, up 2.6% year on year, taking up 95.6% of the national total. The investment from US, EU and Japan stood out with an increase of 463.6%, 30.9% and 22.8% respectively while those from ASEAN, countries along the “belt and road”, and Hong Kong decreased 6.1%, 25.1% and 28.6% respectively.
·The industrial structure of foreign investment was further optimized. In January, the actually utilized FDI in service sector was RMB 59.62 billion, up 5.7% year on year, taking up 67.6% of the national total. Among these, that in hi-tech service sector reached RMB7.2 billion, up 123.4% year on year while that in real estate continued to drop. Its number of newly established enterprises and actually utilized FDI decreased 34.1% and 24.6% respectively. The actually utilized FDI in manufacturing was RMB22.32 billion, down 8% year on year, taking up 25.3% of the national total. Among these, the utilized FDI in special equipment manufacturing and transport equipment manufacturing grew up 44.4% and 5.6% respectively. That in agriculture, forestry, husbandry and fishery stood at RMB660 million, up 15.2% year on year, taking up 0.8% of the national total in manufacturing.
· Both the enterprises quantity of foreign M&A and size of FDI attraction improved. In January, a total of 114 newly-established foreign-invested enterprises by M&A were approved and the actually utilized FDI reached RMB34.36 billion, going up 6.5% and 15.7% respectively year on year. The percentage that M&A took up among the national total has risen to 38.9% from 34.7% over the same period of last year.
· Western China’s attraction of FDI grew remarkably. In January, the actually utilized FDI in western China reached RMB5.87 billion, going up 16.9% year on year. The actually utilized FDI in eastern China stood at RMB78.2 billion, up 4.1% year on year. That in central China was RMB4.18 billion, down 22.2% year on year.
Here are some questions about the investment:
Q1: According to the FDI utilization data in 2015 released by the MOFCOM, Japan's investment in China decreased greatly. What is the main reason?
A: Japan is an important source of investment in China. By the end of 2015, Japan has set up a total of nearly 50,000 enterprises in China with the actual investment amounting to over USD100 billion (about USD101.82 billion), ranking the third place in the sources of foreign investment in China. In recent two years, Japan's investment in China has been tending to decline, decreasing by 38.8% in 2014 and 25.8% in 2015. There are four major factors as analyzed by some experts:
Firstly, in recent years, the continued appreciation of RMB compared with Yen not only improves the costs of Japan's enterprises for making investment in China, but also leads to the decline in competitiveness of Japan-funded export-oriented companies to some extent.
Firstly, in recent years, the continued appreciation of RMB compared with Yen not only improves the costs of Japan's enterprises for making investment in China, but also leads to the decline in competitiveness of Japan-funded export-oriented companies to some extent.
Secondly, the economy of China has entered the new normal with slowed growth to some extent, while the cost of Chinese labor force, land and others continues to rise; therefore, a few Japanese companies worry about their development in China and stay in a wait-and-see stage for investing in China.
Thirdly, for the early start of Japan's investment in China, most large Japanese enterprises have set up companies in China, and have achieved good economic benefits. Currently, these Japanese enterprises are more concerned about improving economic benefits of companies in China, so they slow down the expansion of investment scale temporarily.
Fourthly, with the active growth of investment in China made by foreign enterprises and continuous development of Chinese local enterprises, market competition in China becomes increasingly fierce, and some Japanese companies were forced to withdraw from the Chinese market.
It should be noted that according to many surveys, the majority of Japanese enterprises hold an opinion that the Chinese market is very important and has great potential, and they will not give up. As shown in the recent survey of the Japan External Trade Organization, most Japanese companies intend to expand investment business in China, and persons in charge of Japanese companies in China also hold a positive and optimistic attitude towards the expansion of the business in China.
Q2:In recent years, China and the United States devoted themselves to promoting trade and investment cooperation between local governments of the two countries, and also established the working mechanism for this purpose. Could you introduce the relevant situation? Why does the MOFCOM vigorously promote the Sino-US local economic and trade cooperation?
A: As of April 2013, in conjunction with relevant domestic provinces and cities, the MOFCOM established a "Joint Working Group on Trade and Investment Cooperation" mechanism with relevant cities and states in the United States, for the purpose of actively promoting economic and trade exchanges between provinces and states and between cities in the two countries.
After nearly three years' development, at present, the working group mechanisms have increased to six, covering 23 provinces, regions and municipalities in China and six states and cities in the United States. The MOFCOM has established the "Joint Working Group on Trade and Investment Cooperation" mechanism successively and respectively with California in concert with Jiangsu, Inner Mongolia, Shanghai, Shandong, Guangdong, Hebei and Chongqing; with Chicago in concert with Beijing, Shanghai, Tianjin, Qingdao, Shenyang, Hangzhou, Wuhan and Chengdu; with Iowa in concert with Hebei, Liaoning, Jilin and Heilongjiang; with Texas in concert with Tianjin, Fujian, Shandong, Jiangsu and Sichuan; with Michigan in concert with Zhejiang, Hubei, Guangdong, Chongqing and Sichuan; and with Washington in concert with Liaoning, Shanghai, Hunan, Guangdong, Sichuan and Shaanxi.
Under the working group mechanism, provinces, states and cities of both sides carried out communications and cooperation about and in infrastructure, bio-pharmaceuticals, electronic information, agriculture, energy and other complementary fields, enhanced understandings, strengthened mutual trust, and improved trade and investment cooperation. This mechanism remarkably enhanced the enthusiasm of the two sides in conducting the economic and trade cooperation. Member provinces, states and cities carried out closer economic and trade exchanges as well as personnel communications and achieved new development of trade and investment cooperation. It can be said that the working group mechanism has become an important platform for promoting Sino-US practical cooperation among enterprises, and has effectively aroused the enthusiasm of provinces and states other than those as members in being engaged in Sino-US local economic and trade cooperation.
The development of Sino-US relations needs to root in the local, rely on the local and benefit the local. Sino-US economic and trade relations play the roles of "ballast" and "propeller" in Sino-US relations. In the cooperation of the two countries, the local economic and trade cooperation stands on the most basic and practical stage, and on the forefront of improving people's livelihood with cooperation outcomes of the two countries. Vigorously promoting the Sino-US economic and trade cooperation between provinces and states and between cities is of great significance in deepening Sino-US economic and trade relations, expanding common interests of the two countries, deepening the friendship between people in the two countries and enriching the connotation of new Sino-US relations. In the future, we will continue to devote major efforts to do so.
Q3: How far the U.S.-China bilateral investment treaty negotiations have progressed up to now? Could you introduce the relevant situation?
A: Since its launch in 2008, the U.S.-China bilateral investment treaty negotiations have drawn wide attention from relevant industries and business circles in the two countries, which hold high expectation therefor.
As at January 2016, 24 rounds of negotiations have been carried out, with smooth overall progress currently. The smooth development of the negotiations is inseparable from great concern and support from the two countries. At the meeting of heads of the two states in September 2015, the U.S.-China bilateral investment treaty negotiations became a major economic achievement. The two sides reaffirmed its role as the most important matter in the bilateral economic and trade relations, and they will make great efforts to promote the negotiations to reach a high-level treaty of mutual benefit and win-win results. The above consensuses have sent a very positive signal to the outside, giving a powerful political force for the negotiations.
In respect of the next negotiations, we still take the attitude that the two sides shall continue to focus on implementing the important consensuses of leaders of the two countries, and strive to reach a high-level investment treaty as soon as possible, thus bringing real benefits to the industries and people in the two countries.
China’s Investment and Economic Cooperation Overseas
Under the guideline of the “belt and road” initiative and international capacity cooperation, China’s investment and economic cooperation overseas sustained a rapid growth and had a good start. According to the statistics by MOFCOM, ,the non-financial direct investment made by the Chinese investors in January reached RMB78.76 billion (excluding the influence of foreign exchange), going up 18.2% year on year, making a good start for China’s investment and economic cooperation overseas this year. The main characteristics are listed as follows:
· Nearly 90% investment flew to manufacturing. In January, RMB10.6 billion investment flew into manufacturing, up 87.8% year on year. It mainly flows to computer/communications and other electronic equipment manufacturing, medicine production, metal products manufacturing, and auto manufacturing. Among these, RMB5.5 billion flew to equipment manufacturing, taking up 51.9% of manufacturing investment, going up 128.3% year on year.
·The delivery of the inter-annual merger and acquisition projects was active. In November 2015, China Three Gorges successfully obtained 30-year franchise rights of Brazilian Jupiá hydropower station and IlhaSolteria hydropower station at the price of 13.8 billion BRL (about US$3.7 billion) in the open auction conducted in the stock exchange of St. Paulo, Brazil. On January 5, the project of the franchise rights of these two hydropower stations was officially completed the delivery. After the deal, the controllable installed capacity and the installed capacity of rights and interests of China Three Gorges reached 6 million kilowatt. China Three Gorges becomes the second largest private power generation enterprise in Brazil and will make positive contribution to the power generation development and the economic construction of Brazil.
·The role of local enterprises was prominent. In recent two years, the role and status of local enterprises in China’s foreign investment has been increasingly prominent. The proportion of the investment from local enterprises accounted for 51% and 66.4% of the total foreign non-financial investment in 2014 and 2015 respectively. Especially, the foreign investment of local enterprises in 2015 registered 488.06 billion RMB, reaching the highest level on record and realized 73.7% of the high-speed growth. In January, the foreign direct investment of local enterprises was 72.87 billion RMB, with an increase of 175.2% year on year, accounting for 92.5% of the total foreign direct investment of China.
·Chinese enterprises still had strong passion for the investment in the United States. Based on the investment of Chinese enterprises to the United States reaching a new record in 2015, the investment to the United States reached 10.22 billion RMB in this January, 3.9 times over the same period last year. At the same time, the sum of the on-going merger and acquisition project exceeds billions of dollars. For example, Haier acquired the GE appliance business at the price of US$5.4 billion, Dalian Wanda Group acquired the Hollywood Legendary Pictures at the price of US$3.5 billion, etc. It is predicted that the investment to the United States will continue to maintain an increase momentum this year.
In January, Chinese foreign investment played a positive role in driving the growth of the world economy and promoting the mutual benefit and win-win result. At present, China’s foreign investment flow ranks the 3rd in the world and the stock ranks the 8th, which not only creates the employment and tax revenue, promotes the transformation and upgrading of relevant industries, improves the infrastructure conditions, but also makes positive contributions to setting examples for developing countries to realize common development and deepen the bilateral relationship.
(Source: Ministry of Commerce of the People’s Republic of China)
