The Western mainstream media has often lashed out against the Chinese Government and the country, but that has not resulted in a negative impact on China when it comes to attracting substantial flows of inbound foreign direct investments (FDI).

According to China's Ministry of Commerce, the nation welcomed 302.4 billion yuan of FDI for the first quarter of 2021, surging 39.9 percent when compared to the same time period last year. FDI inflows valued in U.S. dollars stood at $44.86 billion, rising 43.8 percent year on year.

Investment inflow 

China has already surpassed the pre-pandemic levels of inbound FDI in the same period of 2019 by over 24.8 percent. That's a significant achievement considering the turbulent times and rocky geopolitical landscape of our world today. A number of national and regional sovereign governments have imposed economic sanctions on Chinese officials and enterprises connected to Xinjiang Uygur Autonomous Region.

Economic experts had expressed concerns that China's outlook would dim as the rest of the world began to crawl out of lockdowns, quarantines and strict social distancing measures stemming from the outbreak of the coronavirus. But Western nations have not turned the corner like China has done to curtail the spread of the pandemic, while in Europe and elsewhere many countries continue to report high numbers of new infections.

China has barely been impacted by the virus in recent months and this explains why many foreign-owned companies and investors have poured huge cashflows into the country as they see the benefits of strong social stability, resilient domestic supply chains and manufacturing sectors along with soaring global demand for Chinese imports. China withstood the virus when it was spreading from late December 2019 to early April last year. The Central Government took prompt action by announcing the Wuhan lockdown, implementing partial quarantines nationwide and blocking the free flow of inter-city transportation. Back then, so-called China experts from the West were cheering on the pandemic as they hoped the virus would cause the collapse of the country.

But the countries of Europe and much of the Western world should have spent more time focusing on their own COVID-19 prevention efforts since the virus had struck those nations with a terrible vengeance. China was the only major economy last year to see a rise of its GDP, up 2.3 percent year on year.

There's also a common understanding among business people that "money chases after money." Smart companies are trendspotters and they place their investment bets on perceived winners. China is holding the winning hand for the moment and the country will continue to attract more FDI since many other countries have struggled to rebound. But we should ask: What are the strengths of China's economy and what are foreigners investing into? According to the Shanghai Daily, about 40 percent of FDI growth came from foreign companies expanding operations and investing into fixed assets, which includes real estate, manufacturing and infrastructure. Meanwhile, China's service industry received 237.79 billion yuan ($35.26 billion) of FDI, an increase of 51.5 percent year on year and FDI to the hi-tech service industry rose 43.9 percent. Investments from Southeast Asia rose 60 percent, countries participating in the Belt and Road Initiative had a 58.2-percent increase and investments from the EU rose 7.5 percent.

During the first quarter, 10,263 new foreign-funded firms were opened and registered in the country. By reviewing the figures, we see China has deepened its business ties with the Association of Southeast Asian Nations (ASEAN). The Regional Comprehensive Economic Partnership is a free trade agreement signed last December by leaders of ASEAN member states, Australia, New Zealand, China, the Republic of Korea and Japan. China's cross-border trade and investment activities have soared while its regional partners in Southeast Asia are boosting their respective national economies. ASEAN countries participate in the Belt and Road Initiative and that has delivered positive results for them.

Growth poles 

Another bright shining star for China's economy has been retail sales, which increased by 33.9 percent in the first quarter year on year, while fixed assets investments rose by 25.6 percent. China has emerged as one of the leading drivers of growth for the global economy and that's leading to a significant rise in imports for China, which in return boosts the manufacturing industry worldwide. Chinese people are going on shopping sprees as they have had stable labor market conditions.

Foreign investors should also take a closer look at China's tourism and hospitality sectors. During the pandemic times, many Chinese citizens were required to stay in the cities and towns they lived and worked in. They were not encouraged to travel to other cities or provinces; but China has reopened intercity travel. The Chinese are eager to travel and there will be good business opportunities for companies investing into domestic tourism venues. The five-day May Day holiday, with a huge upsurge of Chinese traveling to other cities within the nation's borders, has set the stage for a blockbuster season of vacation travel this year. They have waited a long time to become tourists again, although international travel restrictions may not be completely lifted until after summer. The delays in international travel could prove beneficial to China's domestic tourism.

Another sector for foreign investors to explore will be the science and hi-tech industry. There have been rumblings that Washington stands prepared to lead its allies, such as the UK, the EU and Japan, to march ahead on imposing more sanctions on Chinese hi-tech firms and to begin the decoupling process with China. But such threats appear to be bluff. Chinese technology companies are tightly integrated with Western-based tech companies and to decouple would inflict serious disruptions to the global economy. We may witness a backing down of the West's tough stance as they realize decoupling could cause more harm than good.

If the West turns around and embraces Chinese innovations in the hi-tech sector, you will see a big wave of fintech investments flowing into Shenzhen and its surrounding communities in Guangdong Province, recognized as China's Silicon Valley. The upsurge of investments into the hi-tech sector will enhance 5G telecom networks, boost automated manufacturing, as well as make people's daily lives much more convenient.

China's economic rebound is marching full speed ahead and that will attract much more inbound FDI for the rest of the year. 

The author is a Beijing-based geopolitical analyst of Asia-Pacific affairs, who pens US vs. China: From Trade Wars to Reciprocal Deal. This is an edited excerpt of an article first published on Cnfocus.com 

(Print Edition Title: Economic rebound attracts more FDI)

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