FDI in China

Overview by Globlatrade.net:

FDI in Figures

The absorption of FDI flow is part of China's opening up to the outside world. After reaching a peak in 2008 and subsequently falling under the effects of the global economic crisis, FDI flows have recovered and the trend should continue in the future.
China is an unexploited market and a potential for considerable growth due to several reasons:
- It's the biggest internal market in the world with 1.3 billion potential customers;
- it's a rapidly growing market (minimum 8% growth per year); and
- the labor costs are low even if this situation is changing in certain areas;
- with the development of the Western provinces, China offers new opportunities, particularly in the Sichuan province.

Nevertheless, certain factors can hinder investments, such as China’s lack of transparence, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which privilege local businesses.

Foreign Direct Investment 2007 2008 2009
FDI Inward Flow (million USD) 83,521 108,312 95,000
FDI Stock (million USD) 327,087 378,083 473,083
Performance Index*, Ranking on 141 Economies 102 94 76
Potential Index**, Ranking on 141 Economies 32 30 -
Number of Greenfield Investments*** 1,214 1,515 1,143
FDI Inwards (in % of GFCF****) 6.0 5.3 37.0
FDI Stock (in % of GDP) 9.7 8.7 10.1

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.


FDI Inflows By Countries and Industry

Main Investing Countries 2008, in %
Hong Kong 38.9
Virgin Brithish Islands 10.0
Japan 7.3
USA 6.6
Taiwan 5.3
Korea 4.7
Singapore 4.2
Caiman Islands 1.8
UK 1.7
Germany 1.7
Samoa 1.4
The Netherlands 1.0
Main Invested Sectors 2008, in %
Manufacturing 46.1
Real estate 17.2
Finance 15.2
Business services 4.7
Wholesale and retail trade 4.1
Transport, storage, telecommunications, postal services 2.6
Computers and software 2.5

Source: Invest in China

Form of Company Preferred By Foreign Investors
Form of Establishment Preferred By Foreign Investors
Main Foreign Companies
Sources of Statistics
Invest in China

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Why You Should Choose to Invest in China

Strong Points
China has a rapidly expanding market, which was not overly affected by the 2008-2009 financial crisis. With a strong potential, a wealth of employees and potential partners eager to learn and evolve, the country is a base for low cost production.
Weak Points
A changing legal context, administrative complexity, the difficulty for foreigners to learn the way of conducting business, both culturally and in practice, a poor middle management level and a very high staff turnover are factors which are often crippling in market acquisition.
Government Measures to Motivate or Restrict FDI
In the foreign investment guide published by the State Commission for Development and Reform in November 2007, the Chinese government made it known that investments in sectors or Chinese companies that already have "a relatively strong production capacity with advanced technologies 'will not be encouraged', while investments in high technology, production of equipment and new materials, and in the services sectors, as well as in the recycling economy, clean production, use of renewable energies and environmental protection, will be welcomed as they are sectors in which China needs foreign companies.

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