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China Foreign Direct Investment: From January to December 2015

As we all know, China has become the world's largest FDI (foreign direct investment) recipient, surpassing the United States. According to the 2015 World Investment Report published by UNCTAD, China is at the top of the 2015-2017 lists of the economies most attractive to multinational companies. China has large and rapidly expanding market which was not overly affected by the financial crisis. With strong potential, a wealth of employees and potential partners eager to lean and evolve, the country is a base for low cost production.

foreign direct investment

Source: UNCTAD, 2015

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

Source: Invest in China - 2016

Why You Should Choose to Invest in China

Strong points:

- China is the biggest internal market in the world with 1.3 billion potential customers.

- It is a rapidly growing market (usually at least 7% growth per year).

- Even though the situation is changing in certain areas, labour costs remain comparatively low.

- With the development of the Western provinces (particularly, the Sichuan province), China offers new opportunities.

Weak points:

- An ever-changing legal context.

- Bureaucratic and administrative complexities.

- Reports of a lack of transparency, corruption and weak intellectual property rights protection.

- Cultural differences in business practice may be difficult for foreigners to learn and apply in new business situations.

- An underdeveloped middle management level and high staff turnover rate, which may cripple market acquisition.

Government Measures to Motivate or Restrict FDI

The Government of China has stated that it will encourage investment in the following industries or sectors: high technology, production of equipment or new materials, the service sector, recycling, clean production, the use of renewable energies and environmental protection.

On the other hand, the Government's foreign investment guide has stated that investments in sectors or Chinese companies that already have a relatively strong production capacity and use advanced technologies 'will not be encouraged' (State Commission for Development and Reform, November 2007).

In addition, the country appears to discourage foreign investment in sectors deemed key to social stability, sectors for which China seeks to develop domestic firms into globally competitive multinational corporations and sectors that have historically benefited from State-sanctioned monopolies or a legacy of State investment. The Government also discourages investments intended to profit from speculation (currency, real estate, or asset). Moreover, the Government has indicated that it plans to restrict foreign investment in resource-intensive and highly-polluting industries.

Nevertheless, there are certain factors can hinder investments such as China's lack of transparency, legal uncertainty, low level of protection of intellectual property rights, and other issue to concern. The pains can be solved by finding an agency s to help you such as Talent Spot. From company registration to business operation, Talent Spot provides turnkey solutions to assist you to grow in China. To reach more information for investing in China, you may click the bottom picture as shown below.

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