In 2023, foreign investment in most regions of the world experienced a slight decline.
Among them, developing countries faced greater pressure in attracting foreign capital, with a 7% decrease in foreign direct investment (FDI) flowing to developing countries in 2023.
On September 9th, Li Nan, Chairman of the United Nations Sustainable Stock Exchanges Initiative Council and Director of the Investment and Enterprise Division of the United Nations Conference on Trade and Development (UNCTAD), released the Chinese version of the World Investment Report (hereinafter referred to as the "Report") at the China International Fair for Investment and Trade (hereinafter referred to as "CIFIT") in Xiamen.
The report revealed the severe situation of global foreign direct investment in 2023.
The report shows that in 2023, global foreign direct investment decreased by 2%, to 1.3 trillion U.S. dollars.
Excluding transit countries for foreign investment, global foreign investment experienced a significant decline of more than 10% for the second consecutive year.
The report also indicates that in 2023, foreign investment in most regions of the world slightly decreased.
Among them, developing countries faced greater pressure in attracting foreign capital, with a 7% decrease in foreign direct investment flowing to developing countries in 2023, to 867 billion U.S. dollars.
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Among them, Asian developing countries decreased by 8%, Africa decreased by 3%, and Latin America and the Caribbean decreased by 1%.
Foreign investment inflows in Europe and North America decreased by 14% and 5%, respectively.
The decline in direct investment is particularly severe for developing countries, as it is often the largest source of external financing for these countries.
The decline in global foreign direct investment is caused by the global economic slowdown and increasing trade and geopolitical tensions.
The report states that geopolitical conflicts and trade protectionism are disrupting the world economy, fragmenting trade networks, regulatory environments, and global supply chains, undermining the stability and predictability of global investment flows.
The report found that nearly half (45%) of all policy changes unfavorable to foreign investors were due to the establishment or expansion of FDI review mechanisms in various countries.
In 2023, four additional countries introduced FDI review systems, and more countries are expected to follow in 2024.
Although the outlook for 2024 remains challenging, the report points out that with the easing of fiscal conditions and the advancement of investment facilitation measures, global foreign direct investment is expected to achieve moderate growth in 2024.
Investment policies in developing countries are more favorable to investors than those in developed countries.
Insufficient global investment directly affects the achievement of sustainable development goals.
Due to tight financing conditions in 2023, the number of international project financing transactions involving projects decreased by a quarter, and international project financing transactions are crucial for financing infrastructure and public services such as electricity and renewable energy.
This has led to a 10% decrease in investment in sectors related to sustainable development goals, with industries such as agriculture, food, water, and sanitation being the most affected.
The number of international financing projects in these sectors in 2023 is even lower than the level when the sustainable development goals were adopted in 2015.
At the same time, the pace of raising funds for sustainable development goals through sustainable financial products in the global capital market is slowing down.
Sustainable bonds experienced slow growth in 2023, while the net inflow of funds into sustainable investment funds decreased by 60%.
UNCTAD research shows that misleading sustainability claims and related "greenwashing" issues further affect investor demand.
The conference calls for more systematic efforts to improve the transparency and credibility of the sustainable fund market.
Clearer product standards, robust sustainability disclosure, external audits, and third-party ratings will help address this issue.
At the same time, the market performance of sustainable financial products is not satisfactory, with slow growth in sustainable bonds and a significant 60% decline in new inflows into sustainable investment funds.
Investors' concerns about products increase, calling for enhanced clarity in product standards, sustainability disclosure, external audits, and third-party ratings to improve market trust.
The report also points out that in response to challenges, investment facilitation is accelerating globally, especially through digital tools to optimize information access, improve transparency, and simplify administrative procedures.
The expansion of digital government services has become a new method to improve cost-effectiveness from the bottom up, not only immediately enhancing user experience but also opening up revenue potential for governments without the need for large-scale legislative reforms.
This approach is particularly beneficial for developing countries, creating new growth points for them in global competition.
The report specifically acknowledges the continuous efforts of developing countries to improve investment facilitation.
The report indicates that in 2023, 86% of investment policies in developing countries are more favorable to investors.
In contrast, developed countries have 57% of measures that are less favorable to investors, as they are adopting more restrictive measures to address national security issues.
Business and investment facilitation are important measures for developing countries to develop the private sector and attract foreign direct investment.
Developing countries have been particularly active in this area, with a significant increase in the number of online single windows and business registration information portals, creating a more favorable environment for private sector development and foreign investment attraction.
Data shows that since UNCTAD proposed the Global Action Plan for Investment Facilitation in 2016, the number of online single windows in developing countries has increased from 13 to 67.
Similarly, the number of enterprise and investor registration information portals in developing countries expanded from 82 in 2016 to 124 in 2024, while developed countries increased from 43 to 48.
China's FDI has declined, but investing in China is still a major trend.
The report shows that China's foreign direct investment has declined in 2023.
Previously, data released by the State Administration of Foreign Exchange showed that in 2023, China's net foreign direct investment was 42.7 billion U.S. dollars, a decrease of 147.5 billion U.S. dollars from the previous year, the lowest since 2001.
In January this year, data released by the Ministry of Commerce showed that in 2023, the actual amount of foreign capital used in China was 1,133.91 billion yuan, a year-on-year decrease of 8.0%.
Ministry of Commerce data shows that from January to July this year, the actual amount of foreign capital used in China was 539.47 billion yuan, a year-on-year decrease of 29.6%, setting a new record for the largest decline since statistics began.
In the view of industry experts, after entering 2023, as the internal and external situation changes, the growth rate of China's actual use of foreign capital has begun to decline.
The reasons mainly include three aspects: First, in the post-pandemic era, developed economies have become more aware of "de-risking," opting for a "China+1" strategy, pursuing a safer and more controllable supply chain.
Second, the recovery of China's economy after the epidemic did not meet expectations, especially the contraction of the household sector's balance sheet leading to weak consumption, and the advantage of a super large-scale market has not been fully utilized.
Third, due to geopolitical factors and some policies and regulations, there is a certain uncertainty in future development, which in turn affects the confidence of foreign capital.
In March this year, Xu Zhibin, Deputy Director of the State Administration of Foreign Exchange, explained the fluctuation of China's foreign direct investment at the Boao Forum for Asia's Investment in Asia's Future sub-forum, saying: "China's FDI trend is basically synchronized with the global and Asian trends.
After reaching a peak in 2021, there were adjustments and fluctuations in 2022 and 2023.
However, looking from a broader perspective, from the global and Asian perspective, or looking at this trend over a longer period, these fluctuations are very normal phenomena."
At the negotiation meeting, Li Nan said that although foreign investment in China has slightly declined in 2023, China is still the world's second-largest recipient of foreign investment and the world's third-largest country for outward investment.
More importantly, the structure of China's foreign investment is continuously optimized, and the quality is continuously improved.
The proportion of foreign investment flowing into high-tech and high-end manufacturing industries is continuously increasing.
As China continues to expand foreign investment access and introduces measures to improve the business environment, China's attractiveness to foreign investment will be further enhanced.
"Investing in China" is still a major trend.
In July, the China Council for the Promotion of International Trade released the "2024 Second Quarter China Foreign Investment Business Environment Survey Report" (hereinafter referred to as the "Report").
The "Report" shows that despite the changes in the international situation, China is still a hot spot for global investment.
The "Report" shows that in the second quarter of 2024, the overall satisfaction of foreign enterprises with China's business environment is relatively high.
Among the 10 surveyed indicators, more than 90% of foreign enterprises rated "municipal public infrastructure installation" "obtaining business premises" "handling business closure procedures" "market access" "cross-border trade" "taxation" "resolving business disputes" and other 7 indicators as "satisfied" or above.
Looking at future investment confidence, more than 40% of surveyed foreign enterprises believe that China's market attractiveness is "rising."
Among them, American enterprises are the most optimistic about the Chinese market among all foreign enterprises, with more than 40% of American enterprises believing that the prospects of the Chinese market this year are "good" and that the attractiveness of the Chinese market is "rising."
Recently, the global well-known management consulting firm A.T. Kearney released the global 2024 Foreign Direct Investment Confidence Index (FDICI) report, which shows that China has jumped from 7th place last year to 3rd place, ranking first in the emerging market special ranking.
In response, Chinese Foreign Ministry spokesperson Mao Ning said that in recent years, China has been continuously promoting institutional opening up, connecting with high-level international economic and trade rules, and a good investment environment and high-level opening up have enhanced the confidence of foreign enterprises to invest in China.
The international community has repeatedly voted "trust" on a series of measures taken by the Chinese government to continuously increase the opening up and optimize the foreign investment environment.
From the introduction of the Foreign Investment Law to the improvement of the foreign-related legal system, from strengthening intellectual property protection to improving institutional norms in various fields, China has introduced a series of favorable policies to attract foreign investment in recent years.
On September 8th, on the opening day of the negotiation meeting, the National Development and Reform Commission and the Ministry of Commerce released the "Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition)," which completely canceled foreign investment access restrictions in the manufacturing sector.
The national foreign investment access restrictions were reduced from 31 to 29, and will be implemented from November 1, 2024.The responsible person from the Ministry of Commerce stated during the interpretation that the comprehensive cancellation of foreign investment access restrictions in the manufacturing sector is an important measure in building a modern industrial system.
It helps China to participate more deeply in the global industrial division of labor and cooperation, creating a more open and resilient industrial chain and supply chain.
It is an important measure to enhance the scale and quality of foreign investment attraction, which is beneficial for further guiding foreign investment towards advanced manufacturing, high-tech fields, continuously optimizing the structure of foreign investment, and accelerating the development of new quality productive forces.
It is also an important measure to deepen the reform of foreign investment management system, implementing consistent management of domestic and foreign investment on a larger scale, which will further enhance the marketization, legalization, and internationalization of the business environment.
This will inject positive momentum into deepening supply-side structural reforms and promoting high-quality development.