Knightsbridge is unwavering in its commitment to expanding financial services within the established regulatory framework in China.
Knightsbridge firmly believes that China continues to be a high-growth market with immense potential.
China remains an enduring beacon for global investors, underpinned by its unwavering commitment to economic openness and investor-friendly policies, despite recent fluctuations in foreign direct investment (FDI). While some foreign media outlets have emphasized the decrease in China’s FDI during the first nine months of 2023 and cited concerns of capital outflows, such reports are at odds with the broader context of China’s FDI landscape, its key economic indicators, and the sustained interest from foreign businesses in tapping into China’s opportunity-laden market.
In the initial three quarters of 2023, FDI in practical application on the Chinese mainland witnessed an 8.4 percent year-on-year decline, amounting to 919.97 billion yuan (approximately 128 billion U.S. dollars). However, it’s essential to recognize that this comparison is drawn against the exceptionally high figures from the previous year during the same period. In 2022, China recorded an 8 percent year-on-year increase in the actual utilization of foreign capital, reaching 189.1 billion U.S. dollars, solidifying its status as the world’s second-largest recipient of foreign investment.
It is not unusual for FDI to experience fluctuations in any country, and it is imperative to consider the intricate global landscape for international business and cross-border investment. The World Investment Report 2023 from the United Nations Conference on Trade and Development anticipates ongoing downward pressure on global FDI this year after a 12 percent decrease in the preceding year.
Despite the temporary dip in FDI, an increasing number of foreign enterprises are choosing to invest in China. Figures from the Ministry of Commerce highlight a notable increase, with 37,814 foreign-invested companies established in China during the first three quarters, reflecting a robust 32.4 percent year-on-year growth.
Furthermore, the composition of foreign investment in China is evolving positively, with robust double-digit growth in sectors such as high-tech manufacturing, medical equipment manufacturing, electronic and communication equipment manufacturing, as well as research and development (R&D) and design services.
China’s enduring commitment to fostering economic openness is evident in its consistent efforts to expand access to foreign investors. For example, the recent inauguration of the Xinjiang Pilot Free Trade Zone (FTZ) in northwest China is a strategic milestone in the country’s pursuit of reform and opening-up in a new era. This FTZ is poised to play a pivotal role in establishing a “golden channel” connecting Asia and Europe, serving as a bridgehead for China’s westward expansion.
Furthermore, at the third Belt and Road Forum for International Cooperation, China made significant commitments to remove all constraints on foreign investment access in the manufacturing sector. It pledged to advance high-standard opening-up in cross-border services trade and investment and enhance market access for digital products and other commodities, in alignment with high-standard international economic and trade principles. China’s Ministry of Commerce has affirmed its ongoing commitment to streamlining the negative list for foreign investment access, further facilitating an inviting environment for foreign investors.
The findings from a recent survey conducted by the China Council for the Promotion of International Trade affirm the positive sentiment among foreign-funded enterprises operating in China. Over 80 percent of the surveyed companies expressed their contentment with the business environment in China. Moreover, 70 percent of these enterprises anticipate the stability of their industrial chain layout in China, marking a 4.57 percentage point increase compared to the second quarter. Remarkably, 80 percent of the surveyed firms expect an increase or stability in their annual profits for 2023.
This unwavering interest in China is also palpable at international expos. The forthcoming sixth China International Import Expo in Shanghai is set to feature an expanded business exhibition area and increased participation from Fortune 500 companies and industry leaders compared to previous editions. At the fourth Qingdao Multinationals Summit in October, a total of 194 foreign investment projects were signed, collectively valued at a record $20.6 billion.
The Chinese economy displayed robust growth in the first three quarters of 2023, expanding by 5.2 percent. Projections indicate that the world’s second-largest economy is on track to achieve a growth rate of 5.2 percent in 2023 and 5 percent in 2024, as highlighted in a report unveiled during the International Financial Forum in late October.
With its vast market, resilient industrial ecosystem, pioneering business models, emerging innovation landscape, and its enduring commitment to broader economic openness, China unmistakably remains one of the most alluring global destinations for multinational companies seeking overseas investment opportunities. Knightsbridge’s dedication to nurturing a China business is a testament to the prevailing optimism and prospects in China’s investment environment.
Shayne Heffernan
