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.
|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||2011||2012||2013|
|FDI Inward Flow (million USD)||123,985||121,080||123,911|
|FDI Stock (million USD)||711,802||832,882||956,793|
|Performance Index*, Ranking on 181 Economies||43||-||-|
|Potential Index**, Ranking on 177 Economies||1||-||-|
|Number of Greenfield Investments***||1,432||1,083||1,040|
|FDI Inwards (in % of GFCF****)||3.7||3.1||2.9|
|FDI Stock (in % of GDP)||9.7||10.0||10.4|
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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Last Updates: January 2015