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The Proposition of Foreign Capital Fleeing China is Untenable

Although foreign investment worldwide has been growing in recent years, the growth has been lackluster.

Developed countries and emerging economies all treat absorbing foreign investment as a key policy focus, intensifying international competition in investment attraction.

At the same time, following the surge in cost factors like labor and land, China’s traditional advantage of attracting foreign investment through low-cost resources has gradually diminished.

Furthermore, with the strengthening of China’s technological capability and value chain extension through national development, the country has reduced its dependence on foreign investment. This has further increased the likelihood of foreign enterprises which are less efficient and less technology-intensive to relocate out of China.

Nonetheless, China’s comprehensive advantages and potential for attracting foreign investment are also improving. Apart from its strong economic fundamentals such as its enormous market size and complete industrial system, what’s more imperative is China’s unwavering commitment to deepening reform in foreign investment. For instance, revisions have been made to the national negative list and pilot free trade zone negative list for six consecutive years, streamlining them further.

Moreover, various regions and departments have persisted with their systematic reviews of regulations and documents inconsistent with the Foreign Investment Law, which include the law’s implementation and judicial interpretations. The long-term trend of foreign investment attraction in China remains unchanged.

The economic concept of “creative destruction” implies that at any given moment, new businesses enter the economy while older ones exit. However, what deserves greater attention is the amount of net enterprises entering – that is to say, whether the cumulative number of enterprises is increasing.

According to China’s State Administration for Market Regulation, as of end-March 2023, the country had 675,000 registered foreign-invested enterprises (including branch offices). This figure has been on the rise since 2012.

With that being said, the proposition of foreign capital fleeing China, which considers only the “outflow” and neglects the “inflow”, fails to take into account the whole picture and is thus, untenable.

Source : CGTN