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
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