China continues to attract FDI

Beijing(China)—Between January and October, China approved 33,068 new foreign-funded enterprises, down 6.32 percent against the same period of last year. The amount of foreign direct investment (FDI) actually utilized was US$48.576 billion, 0.34 percent more than during the same period last year. Foreign investment has become indispensable in China’s economic development. A People’s Daily reporter interviewed Hao Hongmei, an associate researcher exploring the characteristics of China’s absorption of foreign investment at the Research Institute of the Ministry of Commerce.
Reporter: Economic imbalances between eastern and western China remain a problem, a problem which is also apparent in the distribution of foreign investment. What are the reasons for this and how can the problem be solved?
Hao Hongmei: Although investment in central and western China has grown since China launched the Great Western Development strategy, there has been no significant rise in the proportion of FDI ¨C in fact, the west has experienced a decline in the amount of FDI. In spite of the many preferential policies for central and western China, foreign investors still prefer eastern China. There are several reasons for this.
Firstly, investors want their investment to be profitable. One important factor they consider is whether the returns they are likely to get in central and western China will be as high as those they could get in the east. Secondly, western China does not have some of the industrial advantages of the east, and eastern China has long favored big foreign firms. Many scholars believe that encouraging more transnational companies to establish themselves in China should be an important part of the national economic strategy. Policy orientation stirs up competition between east and west China as they both try to lure transnational companies. However, if a region’s resource advantages are neglected for the sake of economic development and “catching-up” with other parts of the country, then development is doomed. The third reason might be the backward concepts of the people in the west. Though projects, funds and preferential policies are of crucial importance in upgrading a region’s foreign investment environment, backward notions are the biggest barrier to foreign investment absorption. The planned economy is still deeply rooted in the western part of China. The western region also fails to make the most of its talented people and abundant natural resources due its lack of money.

—The Daily Mail-China Daily news exchange item