China’s 2020 FDI hits record high amid recovering economy

In a year ravaged by the COVID-19 epidemic, China has managed to overcome challenges and maintain its appeal to foreign investors, official data showed Wednesday.

Foreign direct investment (FDI) into the Chinese mainland, in actual use, expanded 6.2 percent year on year to a record high of 999.98 billion yuan in 2020, the Ministry of Commerce (MOC) said.

In U.S. dollar terms, the inflow went up 4.5 percent year on year to 144.37 billion dollars.

A total of 38,570 new overseas-funded enterprises were established last year, meaning an average of more than 100 firms set up every day.

Commenting on the readings, MOC official Zong Changqing said that the country has become a “stabilizer” and “safe haven” for cross-border investment, contributing to the global economic recovery.

In 2020, China’s foreign investment inflows reached a record high, posting a faster pace of growth and taking up a larger global share despite market projections for a pandemic-triggered contraction across the world, Zong said.

In a report released in May, the Organization for Economic Cooperation and Development foresaw global FDI flows to shrink by more than 30 percent in 2020 even under the most optimistic scenario, with developing countries suffering an even steeper decline.

The better-than-expected performance of China in FDI was mainly shored up by its service and high-tech industries.

Foreign investment in the service sector came in at 776.8 billion yuan in 2020, up 13.9 percent year on year and accounting for 77.7 percent of the total.

The high-tech service industry, one of the favored sectors among investors, registered a 28.5-percent increase from the year before, with R&D and design services surging 78.8 percent year on year.

Major FDI sources also remained stable. The top 15 countries and regions investing in China saw their investment expand 6.4 percent year on year, taking up 98 percent of the country’s total FDI.

Among the major investors were the Netherlands and Britain, whose investment in China rose 47.6 percent and 30.7 percent year on year, respectively, MOC data showed.

With a heavy blow from the virus, China’s FDI contracted in February and March, but soon got back on its feet with a year-on-year growth of 11.8-percent in April, and it maintained an upward momentum till year-end.

Zong attributed the FDI growth to the country’s swift actions to contain the virus, which enabled factories to reopen production capacities, thus creating a solid underpinning for foreign investment.

The FDI rise in 2020 did not come easy, and such an encouraging achievement demonstrated foreign investors’ confidence in China, said Pang Chaoran, a researcher with an institute under the MOC.

Despite protectionist headwinds, China’s opening-up momentum has remained unabated, rolling out measures including cutting its negative list for foreign investors, introducing its master plan for the construction of the Hainan free trade port and further expanding pilot free trade zones in the country.

These pro-investment endeavors have paid off. A recent MOC survey showed that profits of nearly 60 percent of foreign-invested firms in 2020 posted growth or remained flat compared with a year ago, with nearly 95 percent holding an optimistic attitude about future prospects.

Nevertheless, Zong cautioned that challenges will continue for the time being, as the country still faces a complicated and grave situation.

China will continue to expand opening-up, take innovative approaches to encouraging foreign investment and fine-tuning its service system for foreign investors, Zong said.

China’s GDP exceeded the 100-trillion-yuan threshold for the first time in 2020 and it is expected to be the only major economy in the world to post positive growth.