|Speech by Consul General Zhao Weiping at 2014 Greater China Business Conference|
China Continues to be a Promising Land for Foreign Investors
By Zhao Weiping, Chinese Consul General to Chicago
at the Greater China Business Conference 2014
May 10, 2014
Hon. Dean Sally Blount,
Good morning. It is my great pleasure to attend the Greater China Business Conference again. Standing here at the podium, I feel greatly honored. I wish to thank the organizing committee for inviting me to speak before such talented students, distinguished faculties and friends from the local community.
When I was here last year, there were lots of pessimistic views on China's economy. I know today many people still have big worries. However, I do hope they are now more optimistic.
As you know, China's GDP achieved a 7.7% growth last year, well above the goal set up by the government for the year. The GDP growth rate for the first quarter this year was 7.4%, better than market expectation. In addition, employment situation has been good, and inflation rate is low.
Generally speaking, currently, China' economy is sound and stable. The Chinese government sees no possibility of so-called hard landing of the Chinese economy in the foreseeable future as suggested by some economists.
It is true that there is still huge downward pressure on China's economy. Facing the challenging economic situation, the Chinese government is seeking solutions to all the problems through deepening reforms in an all-around manner, rather than resorting to massive stimulus measures because of temporary economic fluctuations. The government will continue to work hard on improving quality of the economy and keeping economic growth within a proper range.
As the theme of this conference is "China's Prosperity: the Future of Investment and Consumption", now I wish to focus my remarks on China's investment environment.
Although China is now a relatively capital-rich country, to attract foreign investment will continue to be an important part of China's basic national strategy of opening-up.
Compared with 30, 10 or even 5 years ago, some changes indeed have happened in China's investment environment. Many foreign investors miss the good old days when the investment costs were so low and the returns were so high. Especially, they enjoyed some super-national treatment like exemption on corporate income tax which came to an end in 2007. It is not surprising that some of them find it difficult to cope with the new situation and begin to complain about the investment environment in China.
However, in my view, China continues to be a promising land for foreign investors.
First, as China's opening-up deepens, huge new opportunities are emerging for foreign investors. The government is obviously thinking of reforming the model of managing foreign investment with the goal of eventually giving foreign investors pre-establishment national treatment. More sectors of the economy will be opened, the negative list will be introduced, and equal access and fair competition will be ensured between domestic and foreign investors.
Many new ideas are being tested in the Shanghai Pilot Free Trade Zone launched last September. In addition to the reform of the management model of foreign investment mentioned above, trials are also being carried out in such areas as transforming government functions, expanding the opening-up of the service sector, expediting RMB yuan's convertibility under capital account and realizing a full-scale opening-up of the financial service sector.
The Chinese Government is firmly determined to push forward the construction of the Shanghai Pilot Free Trade Zone, which was described by President Xi Jinping of China as a national strategy. And President Xi called for bolder steps to be taken so as to develop as early as possible a series of new systems which can be duplicated and promoted in other parts of the country. This is certainly good news to foreign investors.
Second, China still holds unique advantages which other developing countries do not enjoy.
China has the largest population in the world, and the Chinese people's wealth has been increasing rapidly.
China's infrastructure is now one of the best in the world. The road, rail, aviation, ports and telecommunication networks are indeed excellent.
Labor costs are still relatively low in spite of big increase over the recent years. Take manufacturing as an example, the annual salary of a Chinese worker accounts for about 17% of his US counterpart. In addition, the diligence and skillfulness of Chinese workers has been widely recognized.
No one can deny that land has become very expensive in China. However, many local governments still provide cheaper land and relevant facilitations to foreign investors depending on the nature and location of the investment.
In addition, as the second largest economy in the world, China boasts a complete modern industrial system and well established supply chain, which foreign investors can hardly find in other parts of the developing world.
Third, Governments at various levels in China continue to be very enthusiastic in attracting foreign investment.
There are now 210 national economic development parks around the country. In those parks, foreign investors can enjoy the same preferential treatment like China's domestic investors in the areas of land use, tax exemption and customs facilitation etc. Actually, many local governments running those parks are often more interested in attracting foreign investors by offering them even more preferential treatment.
There has been a great jump in the flow of international investment into China since China's entry into the WTO in 2001. In some single years, China even became the largest recipient of the newly increased ODI for the year. Last year, China was the second largest ODI recipient only second to the US.
Over the last couple of years, there has been significant capital flow-out from some other major developing countries. However, China continues to enjoy net flow-in of capital and its foreign reserve reached 3.82 trillion US dollars at the end of last year.
In March this year, the ODI flow to China dropped 1.47 percent year on year, which represented the first negative growth in the last 14 months. However, the ODI flow to China for the first quarter this year still scored a 5.5% growth. We should not over-read a single-month decline in March.
The US was the fifth largest investor in China last year. Many US companies are enjoying high returns of their investment in China and are expanding their presence there steadily.
Take US automakers as example. Since 2010, China has overtaken the US as General Motor's largest national market. Last year, GM delivered 3.2 million vehicles in China, accounting for about 35% of the company's global sales. GM has announced new massive investment of around $12 billion in China from 2014 to 2017. Ford China sold almost one million vehicles in China last year, a 49% increase over the previous year. And Ford is spending 5 billion US dollars to build five new plants in China that will more than double its Chinese production capacity to 1.7 million vehicles by 2015.
It is true that not all the US companies are making profits in China and some of them are even experiencing big difficulties. However, many US companies believe the difficulties they have met in China are temporary and most of them choose to readjust themselves rather than pulling their investment out of China. The strategic importance of the Chinese market is indeed difficult to ignore.
Since last July, China and the US have started substantive negotiations on their bilateral investment treaty (BIT). China regards the negotiations as one of China's most important economic and trade negotiations. China hopes both sides will take an attitude of pragmatic cooperation so as to reach an agreement that is mutually beneficial and satisfactory to both sides at an early date. The successful conclusion of the negotiations on the BIT will push China-US mutual investment to a new stage of development.
It is always difficult to make a prediction on the future, and only the passage of time will tell whether we are good forecasters. However, one thing is for sure. In spite of all the difficulties, the Chinese government is fully confident in the path China has embarked on and will continue to make relentless efforts in achieving the goal of China's social and economic development.
Thank you all.