From Chinese Press

Farewell to theory on China's deteriorating business climate

By Wang Zi (People's Daily Online)
Updated: 2010-08-26 09:56

China's foreign direct investment (FDI) rose 29.2 percent year-on-year to 6.92 billion US dollars in July, the 12th consecutive monthly gain, the Ministry of Commerce has said.

According to the United Nations Conference on Trade and Development (UNCTD), China outperformed the rest of the world in 2009 as an ideal FDI destination. The nation's attraction of FDI has been still kept at a higher level, ranking the first place in the use of foreign investment among developing nations.

Ample facts have once again shown how absurd is the so-called theory on China's "deteriorating investment environment."

For a period of time, some overseas media have reported absurdities of the relevant agencies on China's market, which alleged that "China investment environment is deteriorating". In fact, a nation's investment environment includes not only the hard, infrastructure environment but also the soft environment, such as laws and the legal setup, investment services, major elements of production and the supply of basic element resources.

In China's past three-decade reform and opening to the outside world, the Chinese government has input more in the basic infrastructure development, and so the transport and telecommunications sectors expanded rapidly. Meanwhile, China has set up a relatively complete legal system, so as to provide a basis of protecting the legal rights and interests of foreign enterprises and also to create a good and relaxed environment for absorbing overseas capital.

The World Trade Organization (TWO) recently lauded China for the significant role it has played in reviving global trade growth and said the nation has more than fulfilled its commitment to the organization, and "China has also removed all non-tariff measures to abide by the commitment it has made," the Ministry of Commerce acknowledged. In term of serve trade, China has opened up 100 service sectors, far exceeding the average level for developing nations.

Global inflows of FDI fell by 39 percent in 2009 from a shade under 1.7 trillion dollars in 2008 to below 1.2 trillion dollars and FDI into developing countries also fell in the year. Whether the transnational investment was hit hardest in 2009, China nudged further up to second at 95 billion dollars from a third place.

China drew 90 billion US dollars from foreign companies investing in its factories and other productive assets in 2009, only 2.6 percent less than in 2008, according to figures released by the Ministry of Commerce. General Motors says it sold more than 1.2 million cars in the first six months this year and that its sale in China for the first half of 2010 toppled sales in the whole of the United States during the same period. Bayer, Hyundai and P&G are currently mulling their large-scale investment in China and planning to stream their business operation.

Last year, 71 percent of American firms made profits in China, according to the "2010 business climate survey released by the American Chamber of Commerce in China, and 91 percent, are optimistic about prospects for coordinated success in China for the next five years.

In spite of a general rise in wage and other economic factors, China is still more advantageous in luring or attracting overseas investment. In response to a German company, Chinese Premier Wen Jiabao recently noted that a nation with inferior business environment could not draw so much investment from overseas as China.

As a matter of fact, heed given to some specific issues in investment indicates that large-sized overseas firms have attached an increasing importance to the Chinese market, but on no account can they assume or speculate that "China's investment environment is deteriorating".

In the Spring of 2010, the Chinese government tabled a "20-point plan" on further improving the work on overseas investment. With a greater space to provide for foreign business people to invest in China, there will be bright prospects for foreign investment in term of promoting the nation's independent innovation, industrial upgrading, and the coordinated, sustainable growth in the transformation of its economic growth pattern. Moreover, in the post-crisis era, international capital will play closer attention to its repayment rates, and so it is now a consensuses reached that China has become a central, ideal place for transnational companies to make their investment.