China - Foreign Direct Investment (fDi)

China

Published: January 05, 2004

In 2002, China became the world’s largest recipient of FDI. Stimulated by the government’s economic reform initiatives and increasingly welcoming stance towards foreigners, its economy has averaged 9% growth per year over the past two decades. With the government opening up previously closed sectors of the economy, in line with World Trade Organisation (WTO) requirements, foreign interest is set to intensify.
China has two principal attractions: low cost labour, which has attracted firms seeking to lower production costs, and an enormous domestic market of 1.2 billion consumers. Although the latter has showed only nascent signs of life, rising incomes – up 6.4% in 2002 – hold massive purchasing potential.
China’s investment climate has opened up gradually. In the 1980s, foreigners were restricted to export-oriented joint ventures with Chinese firms. In the early 1990s, foreigners were allowed to manufacture goods for sale in the domestic Chinese market. And by the mid-1990s, the establishment of wholly foreign-owned enterprises was permitted. That said, the emphasis on manufacturing created over-supply of goods while the services sector remained under-developed.
China’s accession to the WTO, however, forces the government to open up the services sector, most notably commerce, financial services, insurance and tourism.

ECONOMIC INFORMATION

Population - 1281.0m
Population growth - 0.72%
GDP (current US$) - $1240bn (2002)
GDP per capita - $966
GDP per capita on a purchasing price parity basis - $4,672
GDP growth - 8% (2002)
Industrial production growth - 12.6%
Inflation (12 month average) - -1.2% (2002)
Exports of goods and services as % of GDP - 26.9%
Top 3 export markets - US, Hong Kong, Japan
Local currency (change vs. US$ Jan 1-Nov 26, 2003) - Yuan renminbi (Managed float)
WEF Growth Competitiveness ranking * - 44/102
WEF Business Competitiveness ranking ** - 46/95
Local industries - Iron and steel, coal, machine building, armaments, textiles and apparel, petroleum, cement, chemical fertilizers, footwear, toys, food processing, automobiles, consumer electronics, telecommunications
Languages - Standard Chinese or Mandarin (official) Regional dialects

GOVERNANCE

World Bank Governance Matters III ***
Political stability - 0.22
Government effectiveness - 0.18
Regulatory quality -     -0.41
Rule of law -     -0.22
Control of corruption -    -0.41
Economic Freedom ranking - 127/165
UN Human Development Index ranking - 104/175

FDI INFORMATION

Region - Peoples Republic China
Number of projects (Jan-Sep 2003) - 1521
Market-share of projects in the region - 92.1%
Value of projects relative to GNP - 30.7%
Top 3 destination sectors - Chemicals, Semiconductors, IT & Software
Top 3 source countries - USA, Japan, South Korea
Top 3 investors - Samsung, LG, Hyundai Motor

IPA

Name - China Invest
Web address - www.chinainvest.gov.cn

* World Economic Forum Growth Competitiveness Ranking assesses an economy’s ability to grow consistently
** World Economic Forum Business Competitiveness Ranking assesses the microeconomic factors that contribute to economic growth
*** The score given is a deviation from the global mean score of zero. Ranged between –2.5 and +2.5, the higher the score, the better the performance

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