Higher-level opening-up and better COVID control boost FDI

Continuous efforts for higher-level opening-up and effective control of COVID-19 have made China more attractive to foreign investors, going by the rapidly growing inflows of foreign direct investment, especially in the services sector, experts said on Tuesday.

They credited services FDI inflows to the favorable growth environment stemming from the country's stable economic growth.

Their comments factored in data released by the Ministry of Commerce on Monday that China's actual use of foreign capital reached 672.19 billion yuan ($103.71 billion) in the first seven months of the year, surging by 25.5 percent year-on-year, and 26.1 percent from the same period in 2019.

Foreign direct investment in the services sector grew by 29.2 percent year-on-year to 535.57 billion yuan, accounting for about 80 percent of the total.

FDI from the countries participating in the Belt and Road Initiative and member countries of the Association of Southeast Asian Nations both expanded 46.3 percent year-on-year.

"The sources of FDI inflows into China are becoming increasingly diversified, as the nation steps up efforts to further open up to the rest of the world and pays more attention to regional cooperation," said Zhang Fei, associate director of the Institute of Foreign Investment, which is part of the Chinese Academy of International Trade and Economic Cooperation.

China's economic and trade cooperation with other BRI economies and the ASEAN markets is thriving, which will make the two groups the main sources of FDI inflows for China in the future, she said.

Cui Fan, an international trade and economics professor at the University of International Business and Economics in Beijing, also said investment activities between China and the ASEAN are booming, thanks to the ASEAN's comparative advantages and the signing of the Regional Comprehensive Economic Partnership agreement last year.

"China controls the epidemic and preempts further blows to the services sector, thus creating a safe environment," Zhang of the IFI said.

She took note of innovations in new services models and business formats since the COVID-19 outbreak, and said online and online-to-offline services helped expand the services market, thereby attracting more foreign capital.

Nie Pingxiang, deputy director of the Service Trade Institute, which is under the Ministry of Commerce, said the services sector has attracted more FDI because it is a major driver of China's economic growth at a time when the Chinese economy is growing and optimizing its structure.

"As China pursues high-quality development and promotes industrial upgrade and transformation, foreign investors will find more business opportunities in the services sector, especially in high-tech services," he said.

Zhang of the IFI said reform and opening-up in the services sector, especially in producer services, have helped attract more FDI. Pilot programs for higher-level opening-up in the services sector were launched in free trade zones and comprehensive demonstration zones, which prove to be effective in attracting more FDI.

"China's strategies to deepen supply-side reform, stimulate demand and expand domestic market also create new business and investment opportunities for foreign investors," she said.

Cui of the UIBE suggested China should further improve the business environment in the country and level the playing field, and enhance its capabilities in attracting FDI to interior regions, to make better use of foreign investors as a link connecting domestic and international markets so they could reinforce each other.