Is China Losing Its Appeal to Foreign Capital?

Promising Service Sector

Foreign investors are venturing into China’s service industry. More capital will flow into this sector, further transforming the current structure dominated by manufacturing industry. In light of the communiqué issued by the Third Plenum of the 18th CPC Central Committee, China will propel the orderly opening-up of fields like finance, education, culture, and medical care, and lift restrictions on foreign access to service sectors such as elderly and child care, architecture design, accounting and auditing, trade and commerce, logistics and E-commerce. Investment admittance to general manufacturing industry will also be broadened. It is foreseeable that overseas investors might show a preference for service industry such as education, medical treatment, family health, accounting, finance, and computers, as well as new types of business represented by supply chain management and E-business. Having been opened up, these industries will grow in both scale and competitiveness.

In general, weak FDI inflow growth is temporary because the world economy is still in the process of a slow recovery. China has gained a place among “middle income” economies through an improved business environment and substantial market demand. We have good reason to believe that China remains an ideal and leading FDI destination. However, there is much room for improvement as regards attracting FDI to China. For example, business circles would welcome a reduction in items on the Shanghai FTZ negative list. Negotiations on the Sino-U.S. Bilateral Investment Treaty should be accelerated. Enhancement is expected of supervision transparency of the business environment. What’s more, consolidated, open, and fair market competition and an orderly market must be maintained. Healthy development of the market economy should be promoted.

HU JIANGYUN is a researcher at the Development Research Center of the State Council.