Q: At present, enterprises from many countries have
expected good investment returns in China, and the country has been
among the world's best in attracting foreign investment. Why are
these foreign enterprises so willing to invest in China? What has
China done in terms of improving the investment
environment?
A: Recently, as the world economy remains in the doldrums and
there exists a substantial decrease in transnational investment,
China has indeed become one of the most attractive countries for
foreign direct investment (FDI), leading the developing countries
and regions in the actual use of foreign capital in the past
decade. In 2002, China absorbed the most FDI in the world,
outpacing the United States for the first time. Statistics show
that since the implementation of reforms and the open policy China
has absorbed a total of US$560 billion of foreign capital and
attracted more than 250,000 foreign enterprises to invest in
China.
The prime reason for China becoming the priority for foreign
investors is that the country provides them with a sound
environment for investment, production and operation.
Firstly, since China implemented of reforms and the open policy
in 1978, its national economy has maintained a high development
speed with an average annual growth rate of 9 percent, coming out
on top of the world. Meanwhile, as China's economy is becoming more
open to the outside world, its production costs including labor,
raw materials and services remain very competitive in the
international market. The sound macro-economic environment has
displayed a tremendous potential for growth and provided favorable
conditions for foreign investment.
Secondly, China is a vast country with abundant agricultural and
natural resources, an advantage for China to attract
resource-seeking foreign investment and a firm support to foreign
investment in the manufacturing and service industries. Besides,
China has greatly improved its infrastructure facilities, such as
transport, telecommunications and water and power supplies and
increased supply ability and capacity of energy, raw materials and
spare parts.
Thirdly, China has established a preliminary market economy
framework. Laws and regulations have been updated; the labor force
is abundant with ever-improving quality. The policies that
encourage foreign investment have gradually measured up to
international standards, providing an easy social and legal
environment for foreign investment.
Fourthly, in the past few years, China has stipulated
comprehensive policies concerning foreign-invested industries and
encouraged foreign investors to put more investment in agriculture,
resource exploration, infrastructure construction, export-oriented
and high and new-tech industries. Foreign investment in those
fields will enjoy preferential treatments.
In 2001, in line with market economy requirements and its
commitment to the WTO, China straightened out and revised relevant
laws and regulations as well as policies and documents, simplified
the examination and approval procedures for the establishment of
foreign enterprises, further opened the finance, insurance,
telecommunications, and distribution sectors, and lifted
restrictions on shareholding rights by foreign-invested companies
in commerce, foreign trade, auto, chemical, infrastructure
construction and mineral resource exploration. All these measures
laid a better foundation for absorbing foreign capital.
Additionally, China is a huge market with a population of over
1.3 billion, which will continue to expand in the coming decade.
Estimate shows, in China's coastal and central areas, a total of
100 million families will have an annual income of 150,000 yuan
(US$18,000) by 2010, meaning these families will be capable of
purchasing private homes and cars. This huge market demand will
provide more potential opportunities for foreign investment in
China.
A new IKEA store opens in Shanghai.
Favorable investment environment in China attracts a good deal of
foreign capital.
