Yang added that China remained a top investment destination for multinational corporations, but that the country's share of FDI inflow against the total FDI inflow of developing economies declined in recent years. The nation "needs to forge an upgraded investment environment to keep steady FDI inflow," he added.
Last year, China was the world's second-largest FDI recipient, with FDI inflow dropping by only 2 percent year-on-year to $121 billion, compared with the 18 percent drop seen for global FDI, according to the United Nations Conference on Trade and Development's 2013 World Investment Report.
Zhang Shixian, a researcher at the Institute of Industrial Economics of the Chinese Academy of Social Sciences, said that China's FDI has seen a golden era since 1992 when the country opened its economy to global investment. FDI inflow into the country also witnessed a growth period from 2001 to 2012 after China joined the World Trade Organization and opened up its domestic market.
"China's FDI is now going through a phase of structural optimization, with the introduction of the 'negative list' in the China (Shanghai) Pilot Free Trade Zone. FDI inflow will not drop in the short term, but its structure will improve," Zhang said.
He added that China's investment environment is changing fundamentally and that the country's huge market has outweighed its role as the world's factory in the past decades.
"Despite rising costs at home, new FDI inflows from now on, which are focused on the high-end manufacturing and service sectors, are less sensitive to cost increases as they are more efficient and aim to grab a share of the expanding Chinese market," Zhang said.
Long Guoqiang, a researcher at the Development Research Center of the State Council, echoed that view.
"Our traditional advantages are changing. Low costs in the past three decades drew huge amounts of foreign investment into China. However, rising wages drove some transnational corporations to move their Chinese plants into lower-cost areas," Long said.
"But we have a new advantage for global investors: a huge and expanding domestic market and competitive costs, which are quite low overall. Transnational corporations are increasingly eyeing China's human resources due to their improvement. Our infrastructure is even better than in some developed economies, and the huge local market is becoming more attractive to global investors," Long said.
He added that the government needs to deepen reforms to attract global investment. Those moves should include opening up the services sector as well as restructuring the manufacturing industry.
Shanghai's pilot FTZ and China's talks on investment pacts with the United States and the European Union also aim to boost investment into the country.
"As China streamlines procedures, FDI will continue to see structural changes. The services and agricultural sectors will see increased shares of FDI inflows, while the central region will likely outpace the eastern and western regions," said Zhang Xiaojing, a researcher at the University of International Business and Economics.
Zhang added that foreign investment in China's eastern areas is being moved to other regions, especially in labor-intensive sectors, due to the rapidly growing labor costs.
The government should encourage the move of those businesses into the nation's inland areas and renew regional production network projects with Southeast Asian economies, she added.
Op Rana
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