Opinion | Chen Wenling: China is still attractive to foreign investment in the post-epidemic era

Since the beginning of this year, the successive “black swan” events have made the global economy’s already weak growth worse. With the accelerated spread of the epidemic, the economies of various countries have entered recession one after another, and global cross-border trade and cross-border investment are full of uncertainties. Against this background, how is China’s economy performing? Can foreign trade, one of the “troikas”, be stabilized? Is China still a “hot spot” for foreign investment? The commentator of “Hot Observation” talked to Chen Wenling, Chief Economist of the China Center for International Economic Exchanges, and commented from an expert’s point of view.

Hot Observation: Under the current environment, what is the overall situation of China’s economic growth?

Chen Wenling : At present, the International Monetary Fund (IMF), the World Bank, and the OECD (OECD) have all lowered their forecasts for world economic growth. The common conclusion is that the world economy will enter the worst recession since World War II. . Compared with the IMF’s forecast of a negative 4.9% global GDP growth rate announced in June, the forecasts of other institutions are even less optimistic. It can be said that more than 90% of the world’s economies will experience negative growth. For larger economies, the IMF had forecast in April that only India and China could see positive GDP growth. Just two months later, however, the organization revised its forecasts: Among the larger economies, only China remained positive, revised down to 1.0 percent from 1.2 percent, and India was revised down to minus 3.2 percent from 1.9 percent.

Hot Observation: How to evaluate the effectiveness of China’s policies to stabilize foreign investment and foreign trade in the first half of the year?

 Chen Wenling : It is very important to stabilize foreign investment and foreign trade. Taking foreign investment as an example, the tax created by it already accounts for 20% of the overall tax revenue, and the employment accounts for 20%. In 2007, foreign capital accounted for 85% of exports, and now it accounts for nearly 50%. It can be seen that foreign capital is very important to the Chinese economy. In the first seven months of this year, China may be the only country in the world that has seen positive growth in foreign investment, with foreign investment exceeding 530 billion yuan, a year-on-year increase of 0.5%. Given the global spread of the epidemic, this is extremely difficult. Looking at foreign trade, from January to July, foreign trade turned from negative to positive. Especially in July, exports increased by 10.4%, achieving positive growth for four consecutive months, which can be said to be a rapid recovery.

With the rapid improvement of the epidemic situation, China quickly resumed work and production at the end of March and early April, and the industrial chain, supply chain, service chain, and value chain have gradually become “alive”. China proposes to build a new development pattern in which the domestic cycle is the main body and the domestic and international dual cycles promote each other. Data in July showed that the added value of industrial enterprises above designated size increased by 4.8% year-on-year, indicating that the connection between the industrial chain and the supply chain is effective, and the domestic cycle has basically been formed.

Hot Observation: For foreign investors, is China still attractive in the face of the “decoupling theory” promoted by the United States?

Chen Wenling : I think China is still one of the most attractive countries for foreign investment, and it can even be said to be ranked first. There are four main reasons:

First, China has the advantage of a super-large market, and market dividends will continue to be released for several years. This may be the biggest attraction for China to attract foreign businessmen, because capital must seek a return on investment. At present, the total retail sales of consumer goods in China is basically the same as that in the United States. In addition, China has a population of 1.4 billion, and the middle class is close to 400 million, which is more than the total population of 320 million in the United States, which means that China will soon surpass the United States and become the world’s largest consumer goods market.

Second, China’s industrial system supporting capacity is the strongest in the world. Strong service supporting capabilities and manufacturing capabilities are important aspects to attract foreign businessmen. Industries with long industrial chains, complex industrial division of labor, and high requirements for industrial supporting capacity are difficult to operate after they are transferred from China. Previously, after some foreign investors transferred their investment to markets with relatively imperfect supporting capabilities, such as Vietnam and Bangladesh, they wanted to return to China because of China’s outstanding industrial supporting advantages.

Third, China’s policy environment for opening to the outside world is getting better and better. There are currently 18 free trade zones in China, including the Hainan Free Trade Zone, the Lingang New Area in Shanghai, and the Shenzhen Socialist Innovation Pilot Demonstration Zone. In addition, there are a series of major regional strategies such as the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, the coordinated development of Beijing-Tianjin-Hebei, and the strategy of the Yangtze River Economic Belt. In recent years, China has continued to expand its opening up, and made a number of major reforms and policy designs. For example, the “negative list for foreign investment access” in the free trade zone has been reduced several times, from nearly 200 to 33. Hainan has There are only 30 trade ports.

Fourth, China’s business environment is getting better and better. In the Doing Business Report released by the World Bank in 2017, China ranked 78th, and this year it has jumped to 31st. Foreign businessmen can gain huge benefits in China, not only because China has a stable political environment, social environment and open market environment, but also because China has super-strong business flow, logistics, information flow, capital flow and other circulation capabilities.

About the author: Chen Wenling, Chief Economist of the China Center for International Economic Exchanges, former Director of the General Department of the Research Office of the State Council . 

 

The original text originated from the WeChat public account (China Regional Economy 50 Forum): Chen Wenling: China is still attractive to foreign investment in the post-epidemic era