Direct investment from Japan, US plunges as China shifts gear

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FDI in service sector shows steady growth, benefits from new policies 

Direct investment from Japan and the United States in China plunged between January and October of this year, which the government said highlighted the country’s transition from a low-profit to a high-end manufacturing economy, and ongoing levels of overcapacity.

During the 10-month period, direct investment from Japan fell 42.9 percent, and from the US by 23.8 percent from a year earlier, but that from South Korea and the United Kingdom surged 26.4 percent and 32.4 percent, respectively, the Ministry of Commerce said.

FDI inflows, which exclude investment in the financial sector, totaled $95.88 billion, a drop of 1.2 percent from the same period a year earlier, although a slight improvement on the 1.4 percent drop registered over the first nine months of the year.

Shen Danyang, the ministry’s spokesman, said as the US and Japan had previously focused on investing in China’s manufacturing industry, the country’s ongoing economic upgrading and measures to tackle industrial overcapacity and protect the environment had affected investment activity in the sectors.

As China continues restructuring its economy, the service sector has become a strategic priority, with the central government issuing a number of guidelines this year to support its development.

As a result, Shen said the ministry had noticed fast growth in service sector FDI. The sector will “continue to benefit from further development policies”, he said.

Shen said future FDI to China is likely to continue to shift from manufacturing to the service sector as well as other high-tech manufacturing industries such as rail, telecommunications and electronic equipment.

The latest ministry figures show that $53.1 billion worth of FDI went to China’s service industry in the first 10 months, a 6.6 percent rise on the same period a year earlier, while $32.5 billion still flowed into the manufacturing industry.

China has gradually opened up its finance, logistics, energy saving, telecom and environmental protection sectors to overseas companies, and encouraged Chinese and foreign companies to cooperate in knowledge-intensive sectors such as software engineering and cross-border e-commerce.

“Rising manufacturing costs are another pressing problem that can be solved by improving the service sector,” said Zhao Zhongxiu, a professor at the University of International Business and Economics in Beijing.

“Increases in labor and resource costs in China and other Asian economies have prompted many American companies to move back to the US.”

China has relaxed its policies to attract more FDI, meaning foreign or joint venture investments between $100 million and $1 billion in value need to be approved by the central government, and projects worth $2 billion or more also need to register with the State Council, according to the 2014 Catalogue for the Guidance of Industries for Foreign Investment, also released on Tuesday.

Only projects in sensitive countries or regions, as well as in sensitive industries, will require approval by the Ministry of Commerce.

“Sensitive” countries or regions are defined as those that have no diplomatic relations with China or those under United Nations sanctions. Other overseas investment projects need only be registered with the ministry.

 

Source : China Daily | November 19, 2014

Thomas D’Innocenzi

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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