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Investing in China, Part I: Harvest Time

By Li Zhenyu (People's Daily Online)

14:19, November 19, 2012


Top Investment Destination

Over the past decade, China has become one of the world's top foreign direct investment (FDI) recipients, with its FDI growing at an average annual rate of more than 9 percent.

The Asian giant once claimed the world's top FDI destination in 2003, and its global FDI inflows in the first half of this year surpassed that of the United States, making China once again the world's largest recipient of global FDI.

China has also maintained the number one spot for FDI among developing countries for 20 consecutive years.

According to statistics released by China's Ministry of Commerce on Nov. 6, FDI in China in 2011 increased 120 percent from that in 2002, representing an average annual growth of 9.2 percent.

As of today, China has received investment from more than 190 countries and regions, and over 480 companies of the Fortune Global 500 have their investment in the world's most populous nation.

By the end of last year, there had been 347 multinational companies that relocated their regional headquarters to China's financial hub Shanghai, and 237 foreign investment companies and 333 research centers had been established in that city.

Latest statistics from the Shanghai Municipal Commission of Commerce showed that enterprises from the United States cover 32.6 percent of the multinational corporations with regional headquarters in Shanghai, with those from Europe and Japan covering 25.4 and 23.7 percent, respectively.

A recent survey from the European Union Chamber of Commerce in China showed that 38 percent of companies surveyed have set up their global business units (GBU) headquarters in China.

Another recent survey conducted by the European Union Chamber of Commerce in China found that three quarters of EU companies have listed China as the world's top three investment destinations, and 63 percent surveyed planed to expand their investment in China.

"The Chinese market has become a bright spot for the global investment, especially after the 2008 financial crisis," said Shi Mingshen, one of China's most influential business commentators.

General Motors (GM), the largest carmaker in the United States, declared bankruptcy in 2009 amid the global financial crisis. In the same year, sales of the reorganized company in China registered a record high of 1.8 million vehicles, up nearly 67 percent from the previous year. In 2010, China overtook the United States as GM's largest market.

"There are still a lot of similar cases, in which the Chinese market played the critical role in the take off of various multinational companies," Ms. Shi said. "For instance, the rise of such global brands as Volkswagen and Samsung all hinged on the Chinese market."

A report released in 2011 by the Economist Intelligence Unit (EIU) revealed that multinational corporations, especially multinational conglomerates, were relying on the Chinese market to bring them more revenues due to the global financial crisis.

The report was based on a survey among senior executives of 328 multinational corporations. Nearly half of the respondents said their expectations of the Chinese market were growing because of the financial crisis, and the percentage rose to 73 percent among those of the multinational conglomerates with turnover of more than $5 billion.

After a decade of staggering economic growth driven by exports and investment, China is well on track to transform itself into a consumption-led economy. In the meantime, the nation is also experiencing structural adjustments in its utilization of foreign investment, shifting the focus from quantity to quality, from speed to efficiency, a new trend that signifies vibrant opportunities for foreign businesses.♦

Read on: Part II: Vibrant Opportunities amid Transition

Li Zhenyu authors the "Golden Decade" column for People's Daily Online.

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