Opinions
2019.06.28 18:52 GMT+8

Rising FDI in China: Business is not influenced by politics after all?

Updated 2019.06.28 21:21 GMT+8
Dialogue with Yang Rui

At a time when the world economy is undergoing uncertainties, the Chinese economy is also experiencing a critical period amid attempts to optimize its structure and transform its growth drivers.

Despite efforts by the U.S. to discourage its companies from doing business in China, foreign direct investment (FDI) into China rose by 3.7 percent from January to May this year. Meanwhile, China's current account balance and goods trade surplus are rising again while services trade deficit has dropped substantially from January to April.

Andy Mok, senior fellow at the Center for China and Globalization, said he was not surprised by the growing FDI figures. He thinks that it's easy to get caught in the news cycle that focuses mainly on China-U.S. relations, but the fact that China is still growing at more than 6 percent yearly should not be overlooked.

Mok continued that the world is more than just the U.S. and China. Trade between Russia and China, as well as Africa and China, is succeeding and benefiting both sides. China's participation in other growth areas is helping to drive the increase in FDI.

Professor Liu Baocheng from the University of International Business and Economics added that the rise in FDI has to do with the continued improvement of the Chinese business environment.

"Business people have their own calculation, they do not really follow the swing of politicians because they’re market driven," said Liu. "Foreign investment used to be here to search for cheaper labor and even lower environmental standard, but now it's really China's buying power that is the most attractive point for foreign investment."

He also pointed out that foreign investors are committing more to the high-end service sector and high-tech sector instead of simply taking part in the manufacturing sector. They're contributing and participating in China's broad strategy of transition to quality growth.

Hong Hao, chief strategist at the Bank of Communications International in Hong Kong, warned that we should be careful taking short-term fluctuations in investment trend as an indicator for longer term ones.

"Having said that, China still represents one of the major investment opportunities with very good infrastructure," said Hong.

He also mentioned that the FDI going into the U.S. has decreased this year and jobs are not returning to the U.S. as President Trump had hoped.

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