What’s the’secret’ to China, who swept overseas last year?

China became the’world’s largest foreign capital inflow country’ last year.

According to the’Global Investment Trend Inspection Report’ recently released by the United Nations Conference on Trade and Development (UNCTAD), the total amount of foreign direct investment (FDI) worldwide decreased by 42% last year, but China’s FDI increased. About 1 trillion yuan (about 177.3 trillion won). This is a 6.2% increase from the previous year.

Of particular interest is the comparison with the United States. Foreign investment in the U.S. peaked in 2016 (approximately $472 billion), but has continued to decline since then. However, investment in China, which was only about $134 billion in the same year, has been increasing since then. While there are still more investments in the US, the Chinese market is becoming more and more attractive.

For what reason?

Last year, when the global economy was staggering due to the Corona 19 pandemic, the Chinese market, which controlled the pandemic relatively quickly, was very good in many ways.

Global consulting firm Ernst & Young recently released a report stating that “Volkswagen, BMW, and Daimler, the three major German automobile brands, performed above average in the Chinese market last year.” The sales volume of these three brands in the Chinese market in the third quarter of 2020 increased by 9% compared to the same period last year.

It’s not just the automotive industry. Starbucks, a global coffee company, also made up for losses in other regions in the Chinese market. The same goes for luxury companies. As the Chinese market was unexpectedly good, money from foreign investors who had nowhere to go was rushing to China.

Shanghai Free Trade Zone Lingang New Port. This is where the factory of Tesla, an American electric vehicle company, is located. It is the first place in China where foreigners have invested independently. The so-called “Tesla Giga Factory” took less than a year from construction to operation. Considering the difficulties that foreign investors have faced in China, this is a change that is close to a pitfall.

Xinhua News Agency analyzed that “the Chinese government has provided only’hardware’ benefits, such as providing factory construction sites to foreign investors, but recently it has been providing’software-type preferences’ such as simplifying the approval process.” He said he knew what was really important to attracting foreign investors.

Examples are the’Business Environment Optimization Ordinance’ and the’Foreign Investment Act’ implemented last year. It is a law designed to minimize the difficulties for foreign investors to enter the Chinese market. That’s why’Tesla Speed’ was able to come out. Xinhua News Agency said, “In the financial sector, the Chinese government plans to expand the application of’Tesla Speed’ to other fields, such as removing the restriction on the foreign equity ratio.”

There is another important thing. It is true that the Chinese government is increasingly strengthening the protection of intellectual property rights. In China, intellectual property rights have not been properly protected. It was a decisive reason for foreign investors to hesitate to invest. Especially in the high-tech industry.

Then, the Chinese government began a major revision of related laws. In 2019, an Intellectual Property Court was established in the Supreme People’s Court, raising the cap on compensation for intellectual property infringement from 500,000 yuan (about 86.61 million yuan) to 5 million yuan. It means that he began to recognize the importance of intellectual property rights, even late. Is it thanks? Last year, the amount of foreign capital in China’s high-tech industry increased by 11.4%.

Can foreigners’ investment continue?

For now, it seems to be. According to a recent report by the American Chamber of Commerce in Shanghai, most companies replied that’they are seeing the Chinese market positively.’ About 80% of these companies said they have no intention of moving their production facilities in China.

However, experts believe that the’China investment risk’ remains. There are several risk factors, such as poor protection for core technologies. Capital control is still there. This is why China is paying attention to what direction China’s overseas capital attraction will go.

Reporter Lim Ju-ri [email protected]