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Cover Stories Series 2013> G2 Arrangement Unlikely> Archive
UPDATED: September 9, 2013 NO. 37 SEPTEMBER 12, 2013
Are Foreign Investors Fleeing China?
The opposite is true, despite the claims
By Lan Xinzhen

In addition, June and July are the boom season for study tours by Chinese residents and dividend distribution by foreign-funded enterprises. In the past few months, the PBC, General Administration of Customs, China Banking Regulatory Commission and the SAFE have taken measures to regulate cross-border yuan settlements, export declarations, the management of bank financial products and foreign exchange inflow, and curb cash flows of false trade. These combined to drag down the funds outstanding for foreign exchange, but would not affect the utilization of foreign exchange.

Some capital withdrawals are even good for China's economic development, such as the outflow of hot money. Zhang Yansheng, Director of the Institute for International Economics Research of the National Development and Reform Commission, believed that with the transformation of China's economic development model, there would be a decline in foreign investments featuring heavy pollution, low added value and short-term gains.

Still attractive

Despite the slowdown, a massive economy and huge consumer market make China an attractive destination for investment opportunities, a report from Anbound Consulting notes.

According to Shenyin & Wanguo Securities, in the context of gloomy global investment, China was second only to the United States in attracting foreign investment. Predictions are high that China will continue to attract steady foreign investment this year.

Lu Zhengwei, chief economist at the Industrial Bank Co. Ltd., said China still has advantages in attracting foreign capital. "In the beginning, China's cheap land and labor were quite attractive to foreign investors. Now, they value the huge market potential more. Although labor costs are rising in China, the quality of its labor force is also improving, and it can undertake jobs with higher added value," said Lu.

Capital is withdrawing from emerging markets as a result of the recovery of traditional economies like the United States. However, China is the developing economy least affected. Foreign investment is bound to flood into China in the long run for its huge development potential, while capital withdrawals are temporary.

A number of foreign-funded enterprises mull over expanding investments in China. In April, General Motor (GM) announced plans to boost its investment to $11 billion in China before 2016. Now, investments have been carried out in new products, facilities and dealers.

Now, GM is trying to expand its dealership network into west China and into inland third- and fourth-tier cities. It has been predicted that another 1,000 dealers will be added to the Shanghai GM and SAIC-GM-Wuling Automobile network before 2017.

"The fact is," said Lu, "foreign investors still favor the Chinese market."

Email us at: lanxinzhen@bjreview.com

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