China Council for the Promotion of International Trade (ccpit) 2009 Preface

Chapter 6 External Cooperation of China's Light Industry

China has been successfully attracted foreign direct investment. Attributed to its favorable investment environment, low wages and rapid growth of domestic market in recent years, China has attracted 6.5% foreign direct investment of the world and 25% of the developing countries in the past decade.

China's foreign direct investment is not evenly distributed in every province. The coastal provinces received 90% of the total foreign direct investment. Although, the government policies advocate investing in the west, the western provinces only received less than 2%. Most of the foreign direct investment is concentrated in the industry, which attracted 60% in 1990s. In 2004, 75% of foreign direct investment flowed into industry, of which, 71% on manufacturing. Service industry attracted 20%, most of which concentrated in real estate development. Banks and public facilities are major sectors to attract foreign direct investment in other countries, but they have very limited performance in China. Foreign direct investment in agriculture is almost negligible.

In 2008, China approved 27,514 foreign investment projects, down by 27.35% on a year-on-year basis, much lower than the previous year. The actual inflow of foreign investment reached 95.253 billion yuan, up by 21.59% on a year-on-year basis. It shows not only the reduction of foreign investment project caused by financial crisis, but also the transfer from quantity to quality in applying foreign investment and China's more rationality in approving foreign investment projects. In December, China approved 2,562 foreign-funded enterprises, down by 25.78% on a year-on-year basis. The actual inflow of foreign investment stood at US$ 5.978 billion, down by 5.73% on a year-on-year basis. Over the same period, the number of U.S.-funded enterprises dropped by 32.55% on a year-on-year basis, with a 12.54% increase in realized investment. The number of enterprises funded by the original 15 European Union countries dropped by 22.65% on a year-on-year basis, with a 30.12% increase in realized investment. China's utilization of foreign investment involves mainly in foreign direct investment and wholly foreign-owned enterprises and few in Sino-foreign joint ventures and cooperative enterprises.

Figure 6 156 China's utilization of foreign fund 2008

Unit: US$ 100 million

Way of utilization of foreign fund	Approved projects in 2008			Realized foreign fund in 2008
	Projects
	2008	2007	Year-on-year growth	2008	2007	Year-on-year growth
Total	27514	37871	-27.35	952.53	783.39	21.59
Foreign direct investment	27514	37871	-27.35	923.95	747.68	23.58
Sino-foreign joint ventures	4612	7649	-39.70	173.18	155.96	11.04
Sino-foreign cooperative enterprises	468	641	-26.99	19.03	14.16	34.40
Wholly foreign owned enterprises	22396	29543	-24.19	723.15	572.64	26.28
foreign-funded joint stocks	38	38	0	8.59	4.92	74.71
Foreign indirect investment	0	0		28.58	35.72	-19.98
Foreign shares	0	0		0.77	4.02	-80.85
International lease	0	0		1.44	1.80	-20.00
Compensatory trade	0	0		0.52	0.18	192.25
Processing and assembling	0	0		25.85	29.72	-13.02

Source: Ministry of Commerce of the People's Republic of China Department of Foreign Investment Administration

In 2008, China attracted actual foreign direct investment of US$ 92.395 billion, up by 23.58% on a year-on-year basis. Among that, 10 Asian countries investment accounted for 59.97%, up by 4.62 percentage points than 2007. Hong Kong invested US$ 41.036 billion, accounting for 44.41%, up by 48.13% on a year-on-year basis. Japan invested US$ 3.652 billion, accounting for 3.95%, up by 1.76% on a year-on-year basis. EU major countries investment accounted for 5.41%, up by 30.12% on a year-on-year basis. North America invested US$ 3.488 billion, accounting for 3.77%, up by 15.76% on a year-on-year basis. Among that, U.S. invested US$ 2.944 billion, accounting for 3.19%, up by 12.54% on a year-on-year basis.

Figure 6 157 Analysis on countries/regions of foreign direct investment 2008

Unit: US$ 10,000

Countries/regions	2008	2007	Growth rate	Proportion in 2008	Proportion in 2007	Proportion growth
Total	9239544	7476789	23.58
10 Asian countries/regions	5540994	4138335	33.89	59.97	55.35	4.62
Hang Kong	4103640	2770342	48.13	44.41	37.05	7.36
Indonesia	16725	13441	24.43	0.18	0.18
Japan	365235	358922	1.76	3.95	4.8	-0.85
Macao	581616	63700	-8.7	0.63	0.85	-0.22
Malaysia	24696	39725	-37.83	0.27	0.53	-0.26
Philippines	12687	19532	-35.05	0.14	0.26	-0.12
Singapore	443529	318457	39.27	4.8	4.26	0.54
Korea	313532	367831	-14.76	3.39	4.92	-1.53
Thailand	12921	8948	44.4	0.14	0.12	0.02
Taiwan Province	189868	177437	7.01	2.05	2.37	-0.32
EU major countries	499451	383838	30.12	5.41	5.13	0.28
Belgium	5586	9584	-41.72	0.06	0.13	-0.07
Denmark	29376	12514	134.75	0.32	0.17	0.15
Britain	91401	83094	10	0.99	1.11	-0.12
Germany	90049	73397	22.69	0.97	0.98	-0.01
France	58775	45601	28.89	0.64	0.61	0.03
Ireland	19829	6103	224.91	0.21	0.08	0.13
Italy	49326	34792	41.77	0.53	0.47	0.06
Luxembourg	13283	8246	61.08	0.14	0.11	0.03
Holland	86216	61666	39.81	0.93	0.82	0.11
Greece	1309	235	457.02	0.01		0.01
Portugal	829	823	0.73	0.01	0.01
Spain	20890	21324	-2.04	0.23	0.29	-0.06
Austria	13255	8234	60.98	0.14	0.11	0.03
Finland	5410	5589	-3.2	0.06	0.07	-0.01
Sweden	13917	12636	10.14	0.15	0.17	-0.02
North America	348762	301281	15.76	3.77	4.03	-0.26
Canada	54328	39658	36.99	0.59	0.53	0.06
United States	294434	261623	12.54	3.19	3.5	-0.31
Some free-trade ports	2314227	2262560	2.28	25.05	30.26	-5.21
Mauritius	149371	133250	12.1	1.62	1.78	-0.16
Cayman Islands	314497	257078	22.34	3.4	3.44	-0.04
Britain Virgin Islands	1595384	1655244	-3.62	17.27	22.14	-4.87
Samoa	254975	216988	17.51	2.76	2.9	-0.14
Others	536110	390775	37.19	5.8	5.23	0.57

Source: Ministry of Commerce of the People's Republic of China Department of Foreign Investment Administration

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