Seven Major Trends In China's Utilization Of Foreign Investment

As for mainland's economic development in recent years and the trends in the utilization

of foreign investment in China, an official with Hong Kong Trade Development Council made the following forecast in his talk.

Trend 1: In the next 10 years foreign direct investment (FDD to China will continue to grow steadily. According to preliminary estimates, in the next 10 years FDI to China will be likely to grow at an annual rate of 5 percent to 10 percent. The reasons include: the increasing maturity of the global financial system spurs the flow of surplus capital; China's economic growth offers great potentials; since China's accession to the WTO, the order of the market economy and the investment environment have seen essential improvement; the comparative advantage of China's low labor costs will continue to exist for a long time; and foreign-invested enterprises will make more capital input into upgrading their production equipment and technology.GHD IV MK4 gold

Trend 2: The service sector will attract FDI at a faster pace than other sectors. Due to the gradual relaxation of market access restrictions on China's service sector, especially insurance, telecommunications, commerce and transportation, this sector will attract FDI apparently at a faster pace than other sectors, including manufacturing. It is preliminarily estimated that in the same period the average annual growth rate of FDI in the service sector will reach 10 percent to 15 percent. With such strengths as affinity in language and cultural background, Honk Kong's service sector is set to drive for the mainland market. GHD IV MK4 Black

Trend 3: Labor-intensive industries will continue to be the focus of foreign investment while high-tech industries will see faster investment growth. Foreign investments have traditionally focused on manufacturing industry, particularly labor-intensive industries. This trend will continue in the years ahead with labor-intensive enterprises remaining a substantial proportion of foreign investments. China is likely to develop into "a global factory for processing and production". On the other hand, due to the relatively high living standards in the economically developed coastal cities and the government policies on encouraging the development of high technology, foreign investors will focus on this market by pumping in more investments.

Trend 4: Cross-nation merger and acquisition (M&A) is expected to become a new mode of foreign investment. For a long time, China has mainly used "Greenfield investment" as a means of attracting FDI. According to the statistics of the United Nations Conference on Trade and Development, cross-nation M&A in China is less than US$2 billion a year, accounting for only 5 percent of the country's total FDI. With China's efforts in improving laws and regulations related to cross-nation M&A, such approaches as equity injection, buy-out, share swapping and cross-shareholding will become important modes of investment in China by multinational companies. In particular, as more state-owned enterprises are undergoing asset reorganization and put up for sale, foreign investors will be able to select their target enterprises and acquire controlling stakes through these M & A approaches, including equity injection and buy-out.

Trend 5: The proportion of wholly foreign-owned enterprises by multinational corporations (MNCs) is to be on the rise. Previously, due to policy constraints, most of the investment by MNCs was mainly in the form of joint venture enterprises. Because of differences in corporate culture, operation strategies and management style, the operation of many of these joint venture enterprises is not so satisfactory. Therefore, in the future where policy permits, most MNCs hope to establish wholly owned enterprises. Trend 6: Foreign-invested enterprises (FIEs) targeting China's domestic market will see a marked rise. For a long time, most of the FIEs in China have focused primarily on the international market. On average, around 30 percent to 40 percent of the products are for export. Following the liberalization of restriction on the ratio of products for domestic sale and the ongoing expansion of the domestic market, FIEs targeting China's domestic market will be the mainstream.

Trend 7Foreign investments and operations are to move from special economic zones to other regions. As the preferential policies in special economic zones are gradually.

by: endeavor03

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