FDI growth shows nation's ability to attract capital

Foreign direct investment in China has grown strongly and shows the nation's persistent ability to attract global capital, serving as a powerful rebuttal to reports by some foreign media outlets that investors are withdrawing from the country.

Thanks to its highly concentrated supply chains, enhanced protection of intellectual property, close global linkages and flourishing domestic market, foreign direct investment into the Chinese mainland surged 17.4 percent on a yearly basis to 723.31 billion yuan ($107.41 billion) in the first half of the year, according to the Ministry of Commerce.

Encouraged by reform and opening-up policies, China has built a prominent role in the global market after it manufactured and exported a large number of products, from shirts and teakettles to new energy vehicles and bullet trains, over the past four decades.

Following issues such as the COVID-19 pandemic, the Russia-Ukraine conflict, soaring prices of energy and agricultural commodity products, as well as high rates of inflation occurring in many countries, analysts and foreign business executives said that China's influence on the flow of foreign direct investment is set to expand to even greater levels.

The rapid growth of foreign direct investment shows that short-term economic disruptions caused by the Omicron variant of the COVID-19 virus will not undermine China's ability in attracting global capital in the long run, said Bai Ming, deputy director of the international market research department at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

The scale of China's consumer market continues to matter. The nation offers $5 trillion worth of consumption growth opportunities over the next decade, something that US companies are eager to unlock, said Matthew Margulies, vice-president of China operations for the US-China Business Council.

The key elements in judging whether foreign capital can increase or withdraw are the business environment in host countries and returns on investment. Multinational corporations have gained significant financial returns in various sectors since China began its reform and opening-up in the late 1970s, said Zhang Yongjun, a researcher at the Beijing-based China Center for International Economic Exchanges.

Zhang predicted that China will see a stable flow of foreign direct investment this year and said the country's strength in keeping consumer prices stable and facilitating the operations of global supply chains will bolster stabilization and recovery of the world economy in the coming years.

During a meeting of the Political Bureau of the Communist Party of China Central Committee in late July, policymakers stressed the important role of reform and opening-up in boosting economic development. They said the country should create a sound policy and institutional environment for enterprises with different types ownership.

Chen Chunjiang, director-general of the foreign investment administration department at the Ministry of Commerce, said the government will continue to optimize the business environment, improve services for foreign investors, strengthen regular exchanges with foreign companies and business associations and actively respond to their suggestions.

While expanding the number of comprehensive pilot areas for further opening up the service sector in the second half, the country will accelerate the revision of the catalog of sectors encouraging foreign investment, and guide foreign capital into fields such as high-end manufacturing and scientific innovation, as well as into the central, western and northeastern regions of the country, he added.

Foreign investment in China's high-tech manufacturing sector rose 31.1 percent on a yearly basis between January and June, while the investment in the high-tech service sector jumped 34.4 percent in the first half, according to Commerce Ministry data.

In the meantime, direct investment from the Republic of Korea, the United States and Germany respectively climbed by 37.2 percent, 26.1 percent and 13.9 percent year-on-year.

Nathan Stoner, vice-president of the US-based power solutions provider Cummins Inc and chairman of Cummins China, said its business in the country is vital to the group's growth globally. China continues to be the largest end-market by volume in many of its markets, and one of the fastest developing markets for new energy like hydrogen.

Apart from building its China headquarters for a new power unit in Shanghai, the company will start operations at its expanded East Asia research and development center in Wuhan, Hubei province, in the third quarter of the year, with $150 million in investment to incubate new technologies.

Calvin McDonald, CEO of Lululemon Athletica Inc, a Canada-based athletic and leisure apparel company, said China is expected to be its second-largest market worldwide by 2026 through new store openings and expansion of its product portfolio.

The maker of yoga leggings, training outfits and footwear plans to triple the number of stores on the Chinese mainland from the current 71 to 220 within five years.

"Our new goal is to quadruple our international business again by 2026. China will be a big part of that opportunity as we continue to invest in the market, stores and digital sales solutions," he said.