14th CCIEE Symposium: Is FDI Withdrawing From China?

In the afternoon of 17, October 2017, CCIEE and the Xinhua News Agency National High-end Think Tank co-hosted the 14th CCIEE Symposium under the theme of Is FDI Withdrawing from China? Wei Jianguo, Vice-Chairman of CCIEE, made an opening remark. Zhang Yansheng, Chief Researcher of CCIEE, Pei Changhong, Researcher of the Institute of Economics, Chinese Academy of Social Sciences, Lu Jinyong, Professor of the School of International Trade and Economics & China Research Center for FDI at the University of International Business and Economics, and Zhang Jianping, Director of the Center for Regional Economic Cooperation Research, Chinese Academy of International Trade and Economic Cooperation, MOFCOM, delivered their presentations respectively. Lu Xiaoming, Researcher of the Xinhua News Agency National High-end Think Tank, presided over the symposium.

The experts had an in-depth discussion on whether or not the FDI is withdrawing from China, and they explained that it takes time for foreign companies to adjust themselves to the New Normal of China’s economy. Generally speaking, the motivation of foreign companies to invest in China has experienced three different periods. Before 2005, the low investment costs of China is the main attraction for foreign companies; from 2005 to 2012, the rapid market growth of China lured them to make investment in China; since 2012, however, China’s high-end manufacturing and the ever-increasing services industry are what they are looking for.   

On one hand, the foreign companies that are not able to adapt themselves to the New Normal of China’s economy are leaving China or moving to the southeast Asia/south Asia, while other high-end manufacturers and services providers are keen on entering the Chinese market.

Over the past years, about 70% of the foreign companies were concentrated in the manufacturing industry, in which the wholly foreign-funded companies accounted for 11%, China’s private companies and SOEs accounted for 61% and 28% respectively. On the contrary, more than 70% of today’s FDI have entered China’s services market, especially the knowledge, technology and HR-based industries.

How to implement the Negative List and the Pre-Establishment National Treatment (PENT) as well as improve the business environment should become the focus of future reform. For instance, 90% of the financial industry is owned by the state and thus, the authorities should open this industry to foreign capital.

In the future, China needs to clarify its strategy of utilizing foreign investment and achieve three “transformations”. First of all, it needs to transform itself from the world’s factory to the world’s market and the hub of innovation. Secondly, rather than putting all its efforts on attracting FDI, it should also stress on importing advanced technologies, intelligence and institution. Lastly, China should shift its focus from merely giving the preferential policy to form a transparent, cooperative and global partnership with foreign investors. In terms of macro policy, the government should create an energetic market, a fair and open market access, competitive costs advantage and a sound monitoring system.

The experts believe that China will bring another new wave of FDI if all the measures can be implemented properly.

At the Q&A sections, the speakers took questions from the audience. Researchers from CCIEE, representatives from enterprises, research institutions and news agencies took part in the event.