Editor's note: This analysis is written by Zhang Yu, director of the International Trade Research Department at the Institute of Financial Strategy, Chinese Academy of Social Sciences. The article, translated from Chinese, reflects the author's opinions and not necessarily the views of CGTN.

According to the World Investment Report 2023, global foreign direct investment fell 12 percent in 2022 compared to the previous year due to adverse factors such as the Russia-Ukraine conflict and surging energy and food prices. However, China's utilization of foreign investment increased by 5 percent, reaching an unprecedented high of $189.1 billion. This data demonstrates China's enduring appeal to international industrial capital amid a complex global political and economic landscape, reflecting six major advantages that China possesses to attract foreign investment.

First: Advantage of market size

As one of the world's largest economies, China is second only to the United States. Meanwhile, it is also the world's largest trading and consumer nation. The vast market demand serves as the fundamental reason why China has been consistently attracting foreign direct investment for the past few decades.

Second: Advantage of full industrial chain cluster

As the world's largest manufacturing country, China has a full industrial chain system that is hard for most countries to replicate. The industry ecological cluster formed on this basis can provide multinational companies worldwide with low-cost, high-quality supply chain support and serve as the principal source of new industrial drivers for China to attract foreign investment in the post-demographic dividend era.

Third: Advantage of technological innovation

Currently, the global economy is undergoing a new technological revolution that will bring a far-reaching impact. Recently, China continued to make breakthroughs in high-tech fields and is leading the world in many pioneering areas such as digital technology, new energy, and new materials. Meanwhile, the thriving high-tech industry cluster and vibrant technological innovation environment are also immensely appealing to multinational companies striving for future industrial technology leadership.

Fourth: Advantage of talent and infrastructure

China boasts the world's largest industrial workforce, characterized by education levels and quality that rank among the world's finest. Therefore, even as labor costs increase in China, China still maintains a certain advantage in actual labor costs when productivity factors are taken into consideration. At the same time, China's well-developed infrastructure, particularly its information and digital infrastructure that are compatible with the new technological revolution, leads the world and offers robust support for China to attract foreign investment.

Fifth: Advantage of highly-open policies

The global economy is currently experiencing the impact of protectionism. As a defender of multilateralism, China has been adhering to its policy of opening-up in the past several years. Simultaneously, it has continually reduced trade costs, eliminated trade and investment barriers, and furthered bilateral and multilateral economic and trade investment cooperation through the Belt and Road Initiative, RCEP (Regional Comprehensive Economic Partnership), and bilateral trade and investment agreements. These efforts allow China to foster a high-level opening environment, further bolstering the confidence of foreign enterprises in investing in China.

Sixth: Advantage of business environment that emphasizes both security and convenience

Due to the COVID-19 pandemic and the Russia-Ukraine conflict, multinational companies have started to pay attention to factors relating to supply chain security. The stability demonstrated by Chinese society under external shocks has undoubtedly become a "bonus" when multinational corporations make decisions about their locations. In addition, China has consistently optimized its business environment in recent years. It has actively implemented the negative list principle to expand foreign investment access. Moreover, it has substantially reduced institutional costs and enhanced administrative efficiency through innovations such as streamlining approval processes, facilitating customs clearance, and establishing a single window system. These improvements have become pivotal driving factors in attracting sustained foreign investment into China.