While Western media and officials often depict China’s economy as teetering on the brink of collapse, emphasizing slowing investments, such narratives tend to overlook the broader perspective. Specifically, China is currently concentrating on strategic investment in emerging sectors to bolster sustainable, long-term growth.
It’s true that some investors harbor tempered expectations, which has created challenges. But China is proactively taking steps to mitigate these challenges and reinforce foreign and private sector investment. A case in point is the recent announcement by the People’s Bank of China, which reduced the reserve requirement ratio by 25 basis points. This move is intended to ensure sufficient liquidity and bolster economic recovery.
The Western focus on China’s slowed growth in fixed-asset investment and a dip in private sector investment might create a distorted image of the Chinese economy. On the ground, the reality is different. Events like the China International Fair for Investment and Trade (CIFIT) in Xiamen witness enthusiastic participation from global businesses, underscoring China’s prominence in the global investment landscape. This year, CIFIT hosted over 1,000 business groups from 106 countries, with deals worth 484.57 billion yuan ($66.58 billion) being inked.
Before CIFIT’s inauguration, Xiamen celebrated the initiation or completion of 40 key projects in fields like new energy and IT. These instances mirror the dynamism in cities across China. Investment activities remain vigorous, as evidenced by the numerous deals signed, such as those during the China International Fair for Trade in Services and at a ceremony in Xi’an’s high-tech park.
As China recovers from the pandemic, its three main economic growth drivers – investment, consumption, and exports – remain pivotal. Despite narratives from certain quarters, experts and officials firmly believe that China’s investment landscape is solid. Prioritizing key sectors like technology, green solutions, and new infrastructure will only further sustainable growth.
Interestingly, a report from the Rhodium Group, as cited by Reuters, suggests that Western companies are relocating investments from China to India due to growing concerns. Responding to this, He Yadong from the Chinese Ministry of Commerce, labeled such claims as “inaccurate.” He emphasized that foreign investments from major countries, including the US, Germany, France, the UK, and Sweden, have grown in the initial seven months of 2023. He asserts that the Chinese market retains its allure for foreign investors.
Actual actions of Western companies in China seem to tell a different story than some narratives suggest. Evonik, a German specialty chemical firm, recently expanded its precious metal powder catalyst plant in Shanghai, while the UK-based IHG Group has plans to expand its strong hotel presence in China.
MOFCOM’s data from the first half of 2023 further underscores the growth of Western investment in China. Notably, there was a 173.3% investment surge from France. Investments in China’s high-tech and manufacturing sectors also experienced impressive growth.
Analysts have observed the shift in foreign investment towards high-tech areas. This mirrors China’s strategy of emphasizing emerging sectors to guarantee sustainable economic growth in the long run. China has progressively shifted from extensive infrastructure development, as seen post the 2008 financial crisis, to more targeted, effective investments. Wang Peng of the Beijing Academy of Social Sciences elaborated on this, highlighting targeted investments in fields like smart manufacturing and digital transformation.
Chinese documents and officials regularly spotlight effective investments in emerging sectors and “new infrastructures” like 5G base stations and EV charging points. Recent 2023 data reflects this strategic focus, with significant investment growth in new infrastructure, major energy projects, e-commerce, and services. This growth has outstripped the slower increases in fixed-asset and private sector investment.
Hu Qimu, a prominent figure in the digital real economies integration Forum 50, comments that even with the relative slowdown in fixed-asset investment, the quality and focus of Chinese investment have improved. It’s not just about augmenting GDP size; it’s about ensuring effective quality enhancement.
In light of the global downturn, Chinese authorities have been agile in their efforts to stabilize foreign and private sector investment. Recent measures, released in August and July, aim to enhance foreign and private investment, respectively.
Li Yong, from the China Association of International Trade, concludes that with China’s potential and the government’s supportive policies, both private and foreign investments are set on a stable growth trajectory.