CHINA FDI

Foreign direct investment remains a mainstay of China's rapid growth, with foreign-funded firms currently responsible for about half of the nation's exports. As China tries to move up the value chain, the focus of FDI is shifting from manufacturing to service sector.

FDI History
In the early 1980s when it just introduced economic reforms, China restricted foreign investments to export-oriented operations and required foreign investors to form joint venture partnerships with local firms. In the 1990s, China loosened rules on foreign partnership and allowed wholly foreign-owned companies with preferential tax treatment for those investing in selected economic zones or in government-backed projects such as energy, telecommunication and transportation. However, foreign ownership is capped at 49% in strategic industries like banking.

FDI in Stock Market
Foreign investors used to be allowed to purchase US dollar-denominated B shares listed on the Shanghai and Shenzhen exchanges. The Qualified Foreign Institutional Investor (QFII) program launched in 2002 allows licensed foreign investors to buy and sell Renminbi-denominated A shares.

No 1 FDI Recipient
China has been a leading FDI recipient in the world. It attracted $59.1 billion in FDI in the first half of 2012, overtaking the United States to become the world's largest FDI recipient. Last time China eclipsed the United State on a yearly basis was in 2003.

FDI Makeup
In 2012, $53.84 billion of FDI were made in the service sector, representing 48.2% of the total. Manufacturing and agriculture attracted $48.87 billion and $2.06 billion of FDI, representing 43.7% and 1.9% respectively of the total.

FDI Sources
Asian countries are the major sources of China's FDI. In 2012, top 10 Asian countries and regions (Taiwan, Hong Kong, Macau, Japan, South Korea, Thailand, Malaysia, Singapore, Indonesia and the Philippines) were responsible for nearly 86% of China's $111.72 billion total FDI; the European Union invested $6.11 billion and the United States invested $3.13 billion.

Historical FDI, 1994-2012

Year

FDI, $ Billion

2012

111.72

2011

116.01

2010

105.74

2009

90.03

2008

92.39

2007

74.77

2006

63.02

2005

60.33

2004

60.63

2003

53.51

2002

52.74

2001

46.88

2000

40.72

1999

40.32

1998

45.46

1997

45.26

1996

42.35

1995

37.70

1994

33.80

 

Source: http://www.mofcom.gov.cn/article/tongjiziliao/v/


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