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Foreign Direct Investment in China Drops 28% in Five Months

POSTED ON June 23, 2024 •   World      BY Abiodun Saheed Omodara
A Tesla sign is seen on the Shanghai Gigafactory of the US electric car maker before a delivery ceremony in Shanghai, China January 7, 2020 l Source: Reuters

Foreign direct investment (FDI) in China dropped 28.2% to reach 412.5 billion yuan (approximately $57.94 billion) during the first five months of 2024 from the same period last year, data released by the Chinese Ministry of Commerce said on Saturday.

Despite the decline, 21,764 new foreign-invested firms were established across China in the reporting period, an increase of 17.4%, Xinhua News Agency quoted the Ministry as saying.

“The scale of foreign investment in actual use is still at a historically high level,” according to a ministry official, who attributed the decline mainly to a high comparison base last year.

The manufacturing sector attracted 28.4%, or ¥117.1 billion, of the total FDI inflow, up 2.8% points from the same period last year and indicating continued improvement in investment structure.

FDI inflows into smart consumer equipment manufacturing and professional technical services increased 332.9% and 103.1% year-on-year, respectively.

Meanwhile, China sees significant improvement in the World Competitiveness Ranking 2024 thanks to its strong economic performance, said Arturo Bris, director of the International Institute for Management Development (IMD) World Competitiveness Center.

The new ranking released by the IMD on Tuesday showed that Singapore is the world's most competitive economy, while China is rapidly closing the gap climbing by seven positions thanks to its strong economic recovery post-pandemic.

“The Chinese performance this year is interesting. There is a significant improvement of seven positions. It is one of the countries that has improved the most. Certainly, we see China climbing to the top 10 sooner rather than later,” Bris told Xinhua via video link on Tuesday regarding the ranking.

“China has now reached the 14th position after ranking 21st last year. This is first of all explained by the strong performance of the economy after COVID,” he said.

“There has been improvement in corporate governance practices of Chinese companies and there is better access to talent and financing of technologies in companies. All in all, this points out to a more favorable business environment provided by the government,” Bris said.

Asia is the big winner this year and countries like China, Singapore, Thailand, and Indonesia all improved their positions in the competitiveness ranking, he said.

In the coming years, there will be more fragmentation and protectionism in the global economy, Bris added.

“Countries that have better domestic markets, access to commodities and natural resources like China, are going to perform much better compared to Europe or Latin America. China is going to perform very well in a fragmented economy,” the IMD director noted.

The World Competitiveness Ranking 2024 showed that Switzerland ranked second, and Denmark ranked third.

The ranking also showed that emerging markets are catching up with more advanced economies, especially in the areas of innovation, digitalization, and diversification.

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