Increasing attractiveness to foreign investment demonstrates China’s well managed regulatory environment
Published: May 18, 2021 02:08 PM
Photo: VCG

Photo: VCG

While major economies around the world are still struggling with economic downturn amid COVID-19 resurgence, only China's economy has bounced back after bringing the coronavirus mostly under control and overtaken the US to become the world's top recipient of investment flows. In the first four months of this year, 14,533 new foreign enterprises were established in China, up 50.2 percent year-on-year, according to latest data realeased by China's commerce ministry.

The fundamental reason why China has become the most attractive destination for global capital amid the pandemic is because China's economic governance has withstood the severe test of the coronavirus and fully demonstrated its resilience.

First, China's efficient fight against the coronavirus and production resumption have largely dispeled foreign concerns about the risk of uncertainty. 

In the fight against the coronavirus, the Chinese government's strong resource mobilization ability and efficient execution have been fully demonstrated. As the government attaches great importance to stablizing foreign investment and trade, a series of policies have been put forward to give priority to supporting foreign enterprises to resume production, and to provide effective assistance to foreign-funded enterprises in China in a timely manner。

According to a survey on 399 foreign companies by the American Chamber of Commerce in South China, more than 93 percent of respondents believe the Chinese government offers valuable support for new businesses.

Even as some countries have encouraged manufacturers to move production out of China, and even consider offering subsidizes to lure these companies back, international investors still keep investing in China despite these political pressure, which shows a high degrees of recognition and strong confidence in China's governance capacity.

Second, China's continuous expansion of opening up and optimization of its business environment have given foreign investors confidence in China's development prospects.

While the pandemic has increased global development risks, led to a rise in protectionism and unilateralism, China has expanded its opening up and actively led the globalization process. This not only injects momentum into global economic governance, but also boosts confidence in international finance. 

The Foreign Investment Law and its implementing regulations was put into effect since the beginning of 2020. The meeting of the Political Bureau of the CPC Central Committee on march 4, 2020 decided to expand the opening up of financial and other services sector to the outside world, continue to release positive signals of orderly progress towards opening up to the outside world. The introduction and implementation of a series of policies to stablize foreign investment have effectively improved China's business environment and encoraged innovation and development for foreign companies.

Third, by improving administrative services and activating market dividends, China has created unique advantages to attract foreign investment. As China continues to accelerate the transformation of government functions and improve its foreign-funded service system, the attractiveness of the Chinese market has been greatly activated. According to the World Bank's 2020 business environment report, China ranks 31st out of 190 economies in the world, and for the second year in a row, China has been ranked in the top 10 economies with the largest improvement across the global business environment in World Bank's list.

The strong growth of foreign investment fully demonstrates the confidence of international capital in China's development prospects, and also the achievements of the Chinese government in continuously promoting the modernization of its governance capacity. Meanwhile, foreign investors, as an important link connecting Chinese and international markets, will certainly contribute strongly to the overall upward trend of China's economy, which will thus inject momentum for sluggish world economy in post-COVID era.

The author is an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.
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