(5)
M&A becomes the new highlight of foreign investment
utilization
Transnational M&A is an important investment mean of
global MNCs. With the lifting of restriction on foreign investors' acquisition
of domestic enterprises, the loosening of the investment fields and the
sharpening of market competition, foreign investors begin to change the
traditional investment mode and the M&A with the characteristics of high
starting-point and scrambling the commanding height in a short cycle branches
out gradually. In 2004, foreign businesses' acquisition of domestic enterprises
and listed companies become a new highlight of China's foreign investment
utilization. For instance, Asahi Beer and ITOCHU CHEMICAL FRONTIER Corporation
acquired 50% equity of Master Kong Holding Co., Ltd in this January, becoming
the acquisition case with the biggest transaction volume in China's consumer
market in recent years.
Several cases of foreign-funded financial
institutions' acquisition of the equity of listed banks also occurred in 2004.
For instance, Hang Seng Bank acquired 15.9% shares of the Industrial Bank in
this April. Xinqiao Investment acquired 17.9% shares of Shenzhen Development
Bank in this May and HSBC acquired 19.9% shares of the Bank of Communications in
this August.
(6) The secondary industry and manufacturing industry still
are the main investment field and the investment quality is
improving
With the expiring of the three-year transitional period for
China's accession of WTO and the good prospect brought forth by China's economic
development, some MNCs have confirmed their new China strategy and accelerated
its investment process in China. The scale of foreign investment in most of
sectors witnesses growth of different degree. Viewed from the industrial
structure of the foreign investor, secondary industry still is the main field of
foreign investment and the proportion of foreign investment utilization is
upgraded. In 2004, the actual foreign investment utilization is US$45.46 billion
in the secondary industry, a growth of 16.0%. It occupies 75.0% of the total
foreign investment utilized, up 1.8% compared with that of 2003. The indicators
of the tertiary industry witnessed declining.
Manufacturing industry is
the major sector of foreign investment in the secondary industry. The contract
foreign investment volume and actual foreign investment utilization was
US$109.74 billion and US$43.02 billion, taking a share of 71.5% and 71.0% of the
national total respectively. The growth rate of the two indicators is 2.5% and
3.1% higher than national average. In the manufacturing industry field, foreign
investment inclines to high-tech enterprises and enterprises with high
technological added-value and capital added-value in such industries as
communication equipment, computer and other electronic equipment manufacturing
industries, chemical raw materials and chemical product manufacturing industry,
communications and transportation equipment manufacturing industry, special
equipment manufacturing industry, non-metal mineral product industry and general
equipment manufacturing industry. The actual foreign investment utilization is
US$7.06 billion, US$2.66 billion, US$3.77 billion, US$1.90 billion, US$1.84
billion and US$2.17 billion respectively.
The rapid development of
Chinese economy and the constant expanding of the market capacity make MNCs
regard the China market an important part of its global one. They adjust their
China strategy in succession and change China from a "manufacturing factory"
into "R&D" base. In 2004, more MNCs established production base, R&D
center and more intense commercial network in China. According to incomplete
statistics, nearly 200 R&D centers were newly established in China.
Presently, there are 700-odd R&D centers established by foreign investors.
Of which, 189 are in Beijing and 140 are in Shanghai. The R&D centers are
not only important support of the global R&D system of MNCs, but the R&D
main body focusing on the China market.
II. Foreign investment
utilization forecast of 2006
(1) More solely
foreign-funded businesses will come out
Solely investment is good for
independent management, intellectual property rights protection, flexibility and
adaptation and the implementation of the strategic idea of the headquarters. The
drawing near of the late-transitional period and the further open of more fields
in the next two to three years will give rise to more foreign-funded businesses.
The "Survey Report of the Trend of MNCs' Investment in China in 2005-2007" of
the Research Institute of the Ministry of Commerce shows that 57% MNCs tend to
solely establish business in production and investment and 46% enterprises tend
to establish independent R&D center in R&D investment.
(2) M&A scale is to enlarge
Although the proportion of
M&A is not high in China, with the acceleration of the process of capital
market, loosening the regulation on the act and quantity of M&A of foreign
investment, the M&A market will be more active in 2006. When the service
sector is open, foreign investment will adopt M&A to obtain initiatives in
order to occupy the market.
(3) Investment quality will be further upgraded
With the sharpening of the competition of
international capital in China's market, foreign investors adjust investment
strategy and enlarge R&D input in succession, some MNCs will continue to
establish regional headquarters and R&D center in China.
(4)
Manufacturing industry still is the key of foreign investment
Although the service industry will be further open in 2005
and the investment in the industry will be strengthened, China's manufacturing
industry has great development room and strong appealing to foreign investors.
As manufacturing industry is a capital-intensive industry, the investment
introduction scale to the total investment will continue to grow.
(5) East China still is the key area for foreign investment
Traditional hot soil for foreign investment, including the
Yangtze River Delta, Pearl River Delta and Bohai Bay are still the first choice
of foreign investors. The implementation of policies for the rejuvenation of old
industrial base in Northeast China and the "grow up" of Central China will help
Central China to enlarge the investment introduction scale. Although the
investment environment is bettering in West China, the infrastructure and
condition for the in-flow of large-scale foreign investment still are not
satisfying.
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