Service Sector Dominates as FDI into China Continues to Rise in 2016
Despite the slowdown in the Chinese economy, foreign investors are still continuing to pile money into the country. Foreign direct investment (FDI) into China grew steadily in January and February this year, rising 2.7 percent year on year to US$22.52 billion, according to the Ministry of Commerce. What has changed is a re-focusing of the worldwide services industry, where some 62.8 percent of all new FDI into China originates from. Of this, FDI in the high-tech service industry grew 157 percent year on year, with investors from the United Kingdom, the United States, the European Union and Japan all continuing to be buoyant.
“We are seeing some retrenchment by foreign-owned, China-based manufacturers to other parts of Asia, especially ASEAN,” says Chris Devonshire-Ellis, Chairman of Dezan Shira & Associates. “Wage and social security payments in China are high, especially when large workforces are required. These businesses are starting to move to lower cost destinations. But China’s overall FDI position shows that these industries are being replaced with new technologies and services, and this is the start of a new China boom in this area.”
This change is very much part of China’s Central Government development policy. Chinese leaders, including President Xi and Premier Li, have often stressed that China will continue efforts to attract more FDI in an increasingly diversified list of sectors. MOFCOM spokesman Shen Danyang stated just last month that MOFCOM were considering new changes in FDI utilization. Amongst them are:
- China will strengthen its legal system for foreign investment, particularly in two areas:
- Accelerating the revision of the Law of the People’s Republic of China on Chinese Foreign Equity Joint Ventures, the Law of the People’s Republic of China on Foreign funded Enterprises, and the Law of the People’s Republic of China on Chinese-Foreign Cooperative Joint Ventures;
- Drafting the Foreign Investment Law and trying to submit the draft to the National People’s Congress for approval in 2016.
- China will further lower the threshold for foreign investment and encourage foreign companies to invest in sectors including high-tech, environmental protection and cutting edge services, in order to supplement the insufficient supply of products and services in these areas.
These statements indicate the importance that China is attaching to the services sector. The latest FDI figures show that this intent is already having a positive effect on driving foreign investment into China. This also goes hand in hand with a strengthening of China’s relationship with Hong Kong, which has been a de facto services center for China for decades.
China’s consumer market may still be soft, but change is underway and the country is upgrading from a manufacturing to a services driven economy. Much of the talent, innovation and expertise will come from the West, as China has much to learn and implement in its services sector.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Establishing & Operating a Business in China 2016
Establishing & Operating a Business in China 2016, produced in collaboration with the experts at Dezan Shira & Associates, explores the establishment procedures and related considerations of the Representative Office (RO), and two types of Limited Liability Companies: the Wholly Foreign-owned Enterprise (WFOE) and the Sino-foreign Joint Venture (JV). The guide also includes issues specific to Hong Kong and Singapore holding companies, and details how foreign investors can close a foreign-invested enterprise smoothly in China.
An Introduction to Doing Business in Hong Kong 2016
Doing Business in Hong Kong 2016 is designed to introduce the fundamentals of investing in Hong Kong. Compiled by the professionals at Dezan Shira & Associates, this comprehensive guide is ideal not only for businesses looking to enter the Hong Kong market, but also for companies that already have a presence here and want to keep up-to-date with the most recent and relevant policy changes.
China Investment Roadmap: the e-Commerce Industry
In this edition of China Briefing magazine, we present a roadmap for investing in China’s e-commerce industry. We provide a consumer analysis of the Chinese market, take a look at the main industry players, and examine the various investment models that are available to foreign companies. Finally, we discuss one of the most crucial due diligence issues that underpins e-commerce in China: ensuring brand protection.
China Investment Roadmap: The Entertainment Industry
In this special edition China Briefing Industry Report, we cast our gaze over the broad landscape of China’s entertainment industry, identifying where the greatest opportunities are to be found and why. Next, we detail some of the most important issues for foreign investors to be aware of, including legal, regulatory, and tax considerations specific to the industry. Lastly, we provide an insider analysis of the sector’s unique HR & payroll challenges.
China Investment Roadmap: The Medical Device Industry
In this issue of China Briefing, we present a roadmap for investing in China’s medical device industry, from initial market research, to establishing a manufacturing or trading company in China, to obtaining the licenses needed to make or distribute your products. With our specialized knowledge and experience in the medical industry, Dezan Shira & Associates can help you to newly establish or grow your operations in China and beyond.
- Previous Article China Plugs Cross Border e-Commerce Import Tax Loophole
- Next Article Hard Knock Life: China’s Life Services Industry Undergoes VAT Reform