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October 30, 2018

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Increasingly open China now tops the world as destination for FDI

Instead of retreating from China, foreign companies are reinvesting for the new opportunities to emerge from its further opening-up.

In the first half of 2018, China topped the world in drawing foreign direct investment — about US$70 billion in capital inflows and about 15 percent of the global total, a UN report said recently.

The report by the United Nations Conference on Trade and Development said FDI flows to China grew 6 percent.

In sharp contrast, the global sum during the same period slumped by 41 percent to its lowest in a decade.

“More intensive efforts in attracting foreign investment and opening up markets, such as pilot free trade zones and the more open western regions, are the main reasons for the increase of FDI flows to China,” said James Zhan, director of UNCTAD’s Division on Trade and Enterprises.

China is an attractive investment destination. Its 11 pilot free trade zones in September saw an FDI inflow increase of 14.7 percent, data from China's Ministry of Commerce showed.

Earlier this month, Dutch battery maker Lithium Werks BV announced the decision to invest 1.6 billion euros (US$1.8 billion) in a lithium-ion battery plant in eastern China, the second of its kind. The new factory with an annual production capacity of 8 gigawatt-hours, sufficient for powering 160,000 cars, is planning to start operations in early 2021.

“We’re in China again because it moves faster than others, it makes decisions quickly,” company chairman Kees Koolen said.

And the Dutch company is not alone. Many companies inked investment deals during Chinese Premier Li Keqiang's visit to the Netherlands last week.

Slashing red tape

Among them were Royal Dutch Shell PLC, KLM Royal Dutch Airlines as well as Internationale Nederlanden Group. The deals worth billions of dollars are for existing projects and new joint ventures with Chinese partners.

China has substantially slashed red tape, lifted restrictions and strengthened property rights protection for foreign investors. For example, recently, State Administration of Foreign Exchange removed limits on FDI upfront payments and account validity terms.

BMW has announced an investment of 3.6 billion euros to increase its stake in the joint venture BBA with Brilliance China Automotive Holdings to 75 percent from 50 percent after China unveiled plans to remove the ceiling for foreign ownership in auto joint ventures over five years.

Meanwhile, the largest German automaker, Volkswagen, also one of the first foreign carmakers entering China, is planning massive investments in China to total 15 billion euros until 2022, largely focusing on electric vehicles, driverless vehicles, digitalization and new mobility services.

Rudolf Scharping, Germany’s former defense minister and ex-minister president of state Rhineland Palatinate, said that China is still the “most attractive for foreign investment” despite the rising cost in production, labor and land.


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