Beijing easing inward investment

Over the past few weeks, much has been made of the United States economy's resurgence and the mainland's slowing economic growth. Analysts say that future investment opportunities could come from developed markets such as the US that are seeing a rebound in their economic fortunes, rather than from China.

Looking at the nation's overseas direct investment numbers compared to foreign direct investment growth, it is tempting to believe that this is the case. In 2014, mainland outbound investment increased 14.1 per cent to US$102.9 billion, while foreign direct investment (FDI) in the nation grew at the slowest pace in years, increasing only 1.7 per cent in 2014 to US$119.6 billion, according to the Ministry of Commerce. The numbers suggest that companies are looking at alternatives to China to invest in, but does this really mean that the nation is no longer a good target for investment?

If anything, opportunities for FDI in the mainland are better than they have been for a long time. While the pace of growth slowed last year, the mainland regained the number one spot for FDI, the first time that it has held that position since 2003.

The slowdown in investment on the mainland has largely come from low-value manufacturing. This makes sense, as wage increases and a shift towards developing manufacturing capacity higher up the value chain mean that the nation is no longer a good target for companies seeking to make cheap apparel or basic products.

Future growth in China’s services sector. While FDI into manufacturing fell on the mainland, last year, investment into the services sector increased 7.8 per cent, and the trend is poised to accelerate. As the government seeks to escape the middle-income trap and looks for economic growth engines beyond infrastructure investment and the expansion of industrial capacity, it will increasingly turn to the services sector and look for ways to spur development.