Op-Ed Contributors

No dearth of foreign investors

By Yang Changyong (China Daily)
Updated: 2010-05-18 07:50

Facts on the ground prove that media claims about China's investment environment are far from true

The Western media recently claimed that China's investment environment is deteriorating, pointing out that, due to China's increasing "discrimination" against foreign investment and the "worsening" regulatory environment, the foreign-funded enterprises were facing more difficulties in investing and operating in the country.

Relevant facts and data, however, bear out that, rather than deteriorating, China's investment environment has been constantly improving.

According to a report released by the United Nations Conference on Trade and Development (UNCTAD) on January 19 this year, due to the severe impact of the international financial crisis, global foreign direct investment (FDI) inflows are estimated to have fallen by 38.7 percent in 2009, of which developed economies registered a fall of 41.2 percent, while developing countries saw a decline of 34.7 percent.

FDI inflows are estimated to have declined by 29.2 percent to the European Union, 57 percent to the US, and 53.4 percent to Japan. And, for developing economies, Brazil registered a fall in FDI of 49.5 percent, Russia 41.1 percent and India 19 percent.

In stark contrast, China has performed well in terms of attracting FDI in 2009 with only a slight decline of 2.6 percent. And, since August 2009, China's utilized foreign investment has been mounting steadily.

FDI inflows to China, which went against the global declining trend to some extent, could fully prove that the nation's overall investment environment is endorsed by foreign businesses.

According to the 2010 Special Report on the State of Business In China released by the American Chamber of Commerce, 71 percent of US enterprises in the country reported profits in 2009 and 46 percent reported comparatively higher China operating margins in 2009 than they saw worldwide.

With regard to the five-year optimism among US companies in China, 91 percent of companies reported that their outlook was optimistic, rebounding to the 2007 level.

More than 75 percent of companies believed that China remains a top-three priority in their company's global investment plans for 2010 and nearly 80 percent of American businesses in China planned to expand investment this year.

In recent years, with production factors such as labor, resources, land and environment becoming increasingly scarce, the cost factor is in catch-up mode.

Against this background, the main reason why foreign companies in China could report good profitability and maintain confidence in investment is that the investment environment here is improving, with reduced transaction costs for foreign businesses. This has enhanced the attractiveness of the nation's overall investment environment.