Investment magnet becomes stronger

Cash flows into service sector as interest in manufacturing wanes

China remains at the top of the world's 10 most attractive countries for foreign direct investment, even though last year's global FDI dropped to the lowest point since the 2008 financial crisis, the United Nations Conference on Trade and Development said in a report.

In a recent survey on major multinational enterprises, 28 percent of the respondents chose China as their first choice for FDI, said the organization's World Investment Report 2015.

The country's outbound direct investment, meanwhile, is expected to maintain fast growth in the coming years. "ODI will be a significant driving force of China's industrial upgrading and economic development," as Chinese enterprises have strong balance sheets, the nation's capital markets offer a ready source of funds and the yuan's exchange rate is stable, it said.

According to the UNCTAD, last year's FDI into China was $129 billion, up by 4 percent year-on-year. Investment increased in the service sector while falling in manufacturing. It was the first time that China surpassed the United States as the world's largest FDI recipient.

ODI from the Chinese mainland reached $116 billion last year, up 15 percent, to the third-largest amount after the US and Hong Kong.

Zhan Xiaoning, director of UNCTAD's Division of Investment and Enterprise, said on June 24 that international investment patterns are changing, as more FDI flows into developing countries while inflows into developed ones have been dropping sharply.

"China will play a more important role in readjusting global investment roles," he said.

Developing economies as a group attracted $681 billion of FDI and remained the leading region by share of global investment inflows in 2014, said the UNCTAD report.

Global FDI as a whole fell by 16 percent to $1.23 trillion last year, because of the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks, it said.

However, an increase in measures taken by governments to liberalize FDI, combined with a fall in restrictions, led to enhanced conditions for FDI promotion in 2014.

The organization predicted this year, total global FDI inflows may grow by 11 percent to $1.4 trillion and further rise to $1.5 trillion in 2016 and $1.7 trillion in 2017.

The report also called for reform of the international investment agreement regime, saying that "Policymakers should reform the system to promote sustainable development and bring coherence to the almost 3,300 agreements currently in existence."

UNCTAD Secretary-General Mukhisa Kituyi said: "Reform should be guided by the goal of more effectively harnessing international investment agreements for sustainable and inclusive development".

chenjia1@chinadaily.com.cn

(China Daily Africa Weekly 06/26/2015 page22)