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In this page: FDI in Figures | Why You Should Choose to Invest in China | Procedures Relative to Foreign Investment | Investment Opportunities

 

FDI in Figures

According to the World Investment Report 2013 released by UNCTAD, China is the second largest FDI recipient in the world after the United States. The country is also included in the ranking of economies more attractive to TNCs for 2013-2015. The absorption of FDI is part of the policy of opening China to the outside world. After falling in 2009 due to the global recession, FDI flows have started to increase, a trend that should continue. In 2013, FDI completed grew by more than 5% in value compared to 2012.

China is an unexploited market and has a potential for considerable growth due to several reasons:
- It's the biggest internal market in the world with 1.3 billion potential customers;
- it's a rapidly growing market (minimum 8% growth per year); and
- the labor costs are low even if this situation is changing in certain areas;
- with the development of the Western provinces, China offers new opportunities, particularly in the Sichuan province.

Nevertheless, certain factors can hinder investments, such as China’s lack of transparence, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which privilege local businesses.

 

Country Comparison For the Protection of Investors

  China East Asia & Pacific United States Germany
Index of Transaction Transparency* 10.0 5.0 7.0 5.0
Index of Manager’s Responsibility** 1.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 6.0 9.0 5.0
Index of Investor Protection**** 5.0 5.4 8.3 5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

 
Foreign Direct Investment 201120122013
FDI Inward Flow (million USD) 123,985121,080123,911
FDI Stock (million USD) 711,802832,882956,793
Performance Index*, Ranking on 181 Economies 43--
Potential Index**, Ranking on 177 Economies 1--
Number of Greenfield Investments*** 1,4321,0831,040
FDI Inwards (in % of GFCF****) 3.73.12.9
FDI Stock (in % of GDP) 9.710.010.4

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

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Why You Should Choose to Invest in China

Strong Points
China has a rapidly expanding market, which was not overly affected by the financial crisis. With a strong potential, a wealth of employees and potential partners eager to learn and evolve, the country is a base for low cost production.
Weak Points
A changing legal context, administrative complexity, the difficulty for foreigners to learn the way of conducting business, both culturally and in practice, a poor middle management level and a very high staff turnover are factors which are often crippling in market acquisition.
Government Measures to Motivate or Restrict FDI
In the foreign investment guide published by the State Commission for Development and Reform in November 2007, the Chinese government made it known that investments in sectors or Chinese companies that already have "a relatively strong production capacity with advanced technologies 'will not be encouraged', while investments in high technology, production of equipment and new materials, and in the services sectors, as well as in the recycling economy, clean production, use of renewable energies and environmental protection, will be welcomed as they are sectors in which China needs foreign companies.
Bilateral Investment Conventions Signed By China
China has signed bilateral agreements for investments with several countries.
To see the list of the countries, click here.
To see the conventions, click here.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Varies according to the sector. Necessity to submit its 'business plan' for prior approval to setting up.
Acquisition of Holdings
The acquisition of majority interest in a local company is authorized in China according to the sectors.
Obligation to Declare
The agency for promotion of foreign investments in the country facilitates getting information on authorizations necessary for setting up.
Requests For Specific Authorizations
Necessity for all projects to submit a business plan subject to approval by competent authorities.

Learn more about Foreign Investment in China on Globaltrade.net, the Directory for International Trade Service Providers.

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Investment Opportunities

Investment Aid Agency
Invest in China
Tenders, Projects and Public Procurement
Chinabidding, Tenders in China
Tenders Info, Tenders in China
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
Other Useful Resources
The heading dedicated to business opportunities of the Chinese agency for international investors
 
 

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Learn more about Investing in China on Globaltrade.net, the Directory for International Trade Service Providers.

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Last Updates: January 2015