context: Addressing concerns about the decline in foreign investment, Jiang Xiaojuan 江小涓 China Society of Industrial Economics president and former State Council deputy secretary-general urges viewing the issue more rationally in her speech in a macroeconomic forum organised by the Chongyang Institute of Finance. She notes that the reasons for these enterprises' departure are multifold, and not always linked to their confidence in the PRC business environment. However, Jiang has yet to concretely address how to boost foreign investment's confidence in this regard.
Foreign investment in the PRC is currently in an adjustment phase, and the number of the proportion of foreign investment is affected by multiple factors, according to Jiang Xiaojuan 江小涓 China Society of Industrial Economics president and former State Council deputy secretary-general
- increasing competition
- foreign firms now face more intense competition with leading Chinese enterprises
- some foreign firms in home appliances, communication equipment, construction equipment, LED panels and e-commerce have already dropped out because of this reason
- but these firms don't usually disclose the reasons for their departure
- fading incentives for domestic companies to utilise foreign capital
- there is currently no shortage of capital for domestic companies
- foreign firms need to bring better technology or overseas markets
- foreign firms' own operational problems and strategic decisions
- normal transfer of labour-intensive industries
Jiang notes that some of the enterprises that left have already returned their supply chains and orders to the PRC to reap the benefits of proximity with industrial chains.
She further outlines some current trends in foreign investment
- foreign investment is picking up pace after the pandemic
- global technology cooperation is developing rapidly
- top products are often produced in multiple countries
On policy recommendations, Jiang suggests the PRC
- still need external resources for some particularly important factors of production
- should overcome any barriers to further opening up and participate in the global division of labour
- should leverage its complete industrial chains and massive market to attract foreign investment