1979～2011 Foreign Direct Investment in China, USD100 million
Years / Number of Projects / Contractual Amount / Actual Amount1979～1982 / 920 / 49.58 / 17.69
1983 / 638 / 19.17 / 9.16
1984 / 2,166 / 28.75 / 14.19
1985 / 3,073 / 63.33 / 19.56
1986 / 1,498 / 33.30 / 22.44
1987 / 2,233 / 37.09 / 23.14
1988 / 5,945 / 52.97 / 31.94
1989 / 5,779 / 56.00 / 33.93
1990 / 7,273 / 65.96 / 34.87
1991 / 12,978 / 119.77 / 43.66
1992 / 48,764 / 581.24 / 110.08
1993 / 83,437 / 1114.36 / 275.15
1994 / 47,549 / 826.80 / 337.67
1995 / 37,011 / 912.82 / 375.21
1996 / 24,556 / 732.76 / 417.26
1997 / 21,001 / 510.03 / 452.57
1998 / 19,799 / 521.02 / 454.63
1999 / 16,918 / 412.23 / 403.19
2000 / 22,347 / 623.80 / 407.15
2001 / 26,140 / 691.95 / 468.78
2002 / 34,171 / 827.68 / 527.43
2003 / 41,081 / 1,150.70 / 535.05
2004 / 43664 / 1534.79 / 606.30
2005 / 44019 / 1890.65 / 724.06
2006 / 41496 / 727.15
2007 / 37892 / 835.21
2008 / 27537 / 1083.12
2009 / 23435 / 900.33
2010 / 27406 / 1057.35
2011 / 27712 / 1160.11
Source:
The Types of FDI in China up to 2008, USD 100 million
tyPES / number of Projects / (%) / ACTUAL aMOUNT / %Joint Venture / 282,901 / 42.87% / 2847.76 / 31.67%
Cooperatives / 59,166 / 8.97% / 968.70 / 10.77%
Foreign Owned / 317,227 / 48.07% / 4,603.25 / 51.20%
Foreign Stockhold / 283 / 0.04% / 50.34 / 0.56%
Cooperative R & D / 191 / 0.03% / 75.07 / 0.83%
Others / 117 / 0.02% / 445.47 / 4.95%
Total / 659,885 / 100% / 8990.59 / 100%
Source:
In earlier years, the “joint venture” is the No. 1 type of FDI. Joint venture means that a foreign investor found a Chinese partner to put the money together to set up a business, which usually involved small amount of capital. In earlier years many foreign investors didn’t have the confidence whether the Chinese communist government would stick to the open-door policy for long. They feared that the communist government might change the policy and nationalize their investments like it did in 1949.That they put a small amount of money into China for test. If the government nationalized their capital, the loss was small. If the government insisted on the open door policy, they had already captured a small share of the market. After 30 years of open door policy, many foreign investors were convinced that Chinese communist party would stick to the open door policy, the big companies started to come to China. They didn’t like to share capitals with Chinese partners. They preferred to hold 100% capital so that in recent years the “foreign owned” became the No. 1 type of FDI in China.
The First countries and Regions to Invest in China up to 2008, USD100million
Countries and Regions / Number of Projects / (%) / Actual Amount / (%)Hong Kong / 298,620 / 45.25 / 3,495.69 / 38.88
Virgin Islands / 19,474 / 2.95 / 901.00 / 10.02
Japan / 41,126 / 6.23 / 653.76 / 7.27
The U.S. / 56,610 / 8.58 / 596.51 / 6.63
Taiwan / 77,506 / 11.75 / 476.60 / 5.30
Korea / 48,808 / 7.40 / 419.11 / 4.66
Singapore / 17,372 / 2.63 / 378.26 / 4.21
Cayman Islands / 2,401 / 0.36 / 165.07 / 1.84
The U.K. / 6,199 / 0.94 / 156.95 / 1.75
Germany / 6,276 / 0.95 / 150.77 / 1.68
Samoa / 5,469 / 0.83 / 123.15 / 1.37
The Netherlands / 2,283 / 0.35 / 92.61 / 1.03
France / 3,738 / 0.57 / 88.59 / 0.99
Macao / 11,988 / 1.82 / 82.33 / 0.92
Mauritius / 2,019 / 0.31 / 73.36 / 0.82
Others / 59,996 / 9.09 / 1136.83 / 12.64
Total / 659,885 / 100 / 8990.59 / 100
Source:
1. To many people’s surprise, Hong Kong, a small city of some 3,000 square km ranked the distant first among the foreign countries and regions in investing in China. HK was seceded to the British rule in 1842 after the First Opium War. Under the British rule, it escaped the following one century’s invasions by foreign countries (1840---1945) and the Civil War in China (1946---1949). After the Chinese Communist Party came to power in 1949, it carried out the Central Planning System, which made China extremely poor. During the period, Hong Kong flourished as one of the richest region in Asia. When China opened to the world after 1978, HK’s labor cost was about 100 times that of China. Almost all the manufacturing firms were moved into China to take advantage of the cheap labor. In addition, Hong Kong people were Chinese, who don’t have language difficulties or cultural alienation in coming to the mainland to set up their business.
2. Another surprise is that Virgin Islands, unknown to most people in the world ranked the second in investing in China. Virgin Islands, in the middle of the Atlantic Ocean, produced nothing, so that it built itself into the Tax Haven---every company that was registered in it was asked to pay 5% of its business income as tax and no more. Large amount of Chinese capitals were detoured to the Tax Haven, registering companies and returning to China to invest. Why didn’t Chinese firms invest in the country direct, and would direct the money to so far away a place, register the companies, pay 5% tax to the government there and return to China to invest? The answer lied in the favorable policies Chinese government offered to foreign investments. To attract foreign investments, Chinese government offered tax holidays, land rent discounts etc. to the foreign investments. Thus, when a variety of favors added up to more than 5%, it was profitable for the domestic capitals to flow to the Tax Havens to register the companies so that they could enjoy the favors offered to foreign investments by Chinese government.
3. The biggest countries and regions that invest in China could be classified into 4 groups: A. industrial powers like the U.S., Japan, the U.K., Germany, etc; B. rich neighbors like Japan, Korea, Singapore; C. Tax Havens like Virgin Islands, Cayman Islands, Samoa, Mauritius; D. economically independent Chinese territories like Hong Kong, Taiwan, Macau.
Industrial Structure of FDI up to 2008, USD100 million
industries / number of Projects / (%) / contractual Amount / (%)The First Industry / 18,437 / 2.79% / 374.91 / 1.91%
The Second Industry / 469,839 / 71.20% / 12,643.43 / 64.52%
The Third Industry / 171,609 / 26.01% / 6,577.13 / 33.57%
Total / 659,885 / 100% / 19,595.47 / 100%
Source:
The majority of the FDI was put into the second industry (manufacturing sector) to take advantage of the cheap labors in China. It was a proof to the saying that China was the “workshop of the world”.
Percentage of Actual FDI out of Total Fixed Assets Investment in the Society
Years / Total Society Fixed Assets Investment (RMB 100 million) / Total Society Fixed Assets Investment (USD 100 million / Actual Amount of FDI (USD 100 million) / （%）1991 / 5594.50 / 1050.97 / 43.66 / 4.15
1992 / 8080.10 / 1465.22 / 110.08 / 7.51
1993 / 13072.30 / 2268.71 / 275.15 / 12.13
1994 / 17042.30 / 1977.34 / 337.67 / 17.08
1995 / 20019.30 / 2397.23 / 375.21 / 15.65
1996 / 22974.00 / 2763.22 / 417.26 / 15.10
1997 / 25300.00 / 3059.57 / 452.57 / 14.79
1998 / 28457.00 / 3437.29 / 454.62 / 13.23
1999 / 29876.00 / 3608.00 / 403.18 / 11.17
2000 / 32619.00 / 3944.26 / 407.15 / 10.32
2001 / 36898.00 / 4458.11 / 468.46 / 10.51
2002 / 43202.00 / 5223.94 / 527.43 / 10.10
2003 / 55118.0 / 6664.81 / 535.05 / 8.03
2004 / 70073.0 / 8466.20 / 606.30 / 7.16
2005 / 88604.0 / 10816.30 / 724.06 / 6.69
2006 / 109870 / 13782.51 / 727.15 / 5.28
2007 / 137239 / 18048.26 / 835.21 / 4.63
2008 / 172291 / 24811.49 / 1083.12 / 4.37
Note: RMB was converted to USD according to the exchange rate of each year.
Source:
The fixed assets are the symbol of wealth of a nation. Since the direct investments are those that lead to the concrete business, they increase the fixed assets (wealth) of China.
Share of FDI Industrial Output out of the National Industrial Output, RMB 100 million
Years / The National Industrial Output / FDI Industrial Output / (%)1990 / 19,701.04 / 448.95 / 2.28
1991 / 23,135.56 / 1,223.32 / 5.29
1992 / 29,149.25 / 2,065.59 / 7.09
1993 / 40,513.68 / 3,704.35 / 9.15
1994 / 76,867.25 / 8,649.39 / 11.26
1995 / 91,963.28 / 13,154.16 / 14.31
1996 / 99,595.55 / 15,077.53 / 15.14
1997 / 56,149.70 / 10,427.00 / 18.57
1998 / 58,195.23 / 14,162.00 / 24.00
1999 / 63,775.24 / 17,696.00 / 27.75
2000 / 73,964.94 / 23,145.59 / 22.51
2001 / 94,751.78 / 26,515.66 / 28.05
2002 / 101,198.73 / 33,771.09 / 33.37
2003 / 128306.14 / 46019.55 / 35.87
2004 / 187220.66 / 58847.08 / 31.43
2005 / 249625 / 78399.40 / 31.41
2006 / 315630.14 / 99420.83 / 31.50
2007 / 404489.06 / 125036.94 / 30.91
2008 / 496248.67 / 147584.30 / 29.74
Note: Calculation in Comparable Value
Source:
In recent years, about 30% of Chinese industrial output was made by foreign-invested companies. On one hand, it showed the great success of China’s attraction of foreign investments; on the other hand, China relied too heavily on the foreign investments which might cause dangers. The domestic brands, especially in car making, electronics and machinery industries, were destroyed by foreign brands.
Tax Amount from FDI up to 2008 (Tariffs and Land Incomes Not Included)
Years / Total National Tax Income (RMB 100 million) / Increase(%) / Total Amount of Tax from FDI (RMB 100 million) / Increase
(%) / Share
(%)
1992 / 2,876.10 / --- / 122.26 / --- / 4.25
1993 / 3,970.52 / 38.05 / 226.56 / 85.31 / 5.71
1994 / 4,728.74 / 19.10 / 402.64 / 77.72 / 8.51
1995 / 5,515.51 / 16.64 / 604.46 / 50.12 / 10.96
1996 / 6,436.02 / 16.69 / 764.06 / 26.40 / 11.87
1997 / 7,548.00 / 17.31 / 993.00 / 29.97 / 13.16
1998 / 8,551.74 / 13.30 / 1,230.00 / 25.94 / 14.38
1999 / 10,311.89 / 13.40 / 1,648.86 / 33.78 / 15.99
2000 / 12,665.00 / 12.66 / 2,217.00 / 35.45 / 17.50
2001 / 15,165.00 / 19.74 / 2,883.00 / 30.04 / 19.01
2002 / 17,004.00 / 12.13 / 3,487.00 / 20.95 / 20.52
2003 / 20,461.60 / 20.34 / 4, 268.00 / 22.81 / 20.86
2004 / 25,723.00 / 25.70 / 5,355.00 / 25.44 / 20.81
2005 / 30,866.00 / 20.00 / 6,391.34 / 19.35 / 20.71
2006 / 37,636.00 / 21.93 / 7,976.94 / 24.81 / 21.19
2007 / 49,451.80 / 31.39 / 9,972.60 / 25.02 / 20.17
2008 / 57,861.80 / 17.01 / 12,118.90 / 21.52 / 20.94
Source:
The foreign investments contributed some 20% to the tax income of Chinese governments of various levels. That was why Chinese governments attached so big importance to foreign investments.
If you link this table to the previous one, you’ll find that the foreign-invested companies made 30% of China’s industrial outputs, normally speaking they should contribute 30% of tax income of the governments. However, they contributed 20% of the tax income only. The margin between 20% and 30% was the favors in taxes Chinese government offered to the foreign invested companies.
The regions as the destinations of FDI up to 2008 USD100 million
regions / Number of projects / % / Actual amount / %East / 549,582 / 83.28 / 7,418.91 / 82.52
Central / 70,228 / 10.64 / 731.61 / 8.14
West / 39,990 / 6.06 / 403.57 / 4.49
Sectors / 85 / 0.01 / 436.45 / 4.85
Total / 659,885 / 100 / 8990.59 / 100
Notes：sectors include bank, securities, insurance银行、证券、保险行业吸收外商直接投资数据。
east：北京、天津、河北、辽宁、上海、江苏、浙江、福建、山东、广东、海南
central：山西、吉林、黑龙江、安徽、江西、河南、湖北、湖南
west：内蒙古、广西、四川、重庆、贵州、云南、陕西、甘肃、青海、宁夏、新疆、西藏
1986－2011 Import and Export by FDI Firms USD100 million
Years / Import / ExportTotal / FDI firms / Share / Total / FDI firms / Share
1986 / 429.04 / 24.03 / 5.60 / 309.42 / 5.82 / 1.88
1987 / 432.16 / 33.74 / 7.81 / 394.37 / 12.10 / 3.07
1988 / 552.68 / 58.82 / 10.64 / 475.16 / 24.61 / 5.18
1989 / 591.40 / 87.96 / 14.87 / 525.38 / 49.14 / 9.35
1990 / 533.45 / 123.02 / 23.06 / 620.91 / 78.13 / 12.58
1991 / 637.91 / 169.08 / 26.51 / 719.10 / 120.47 / 16.75
1992 / 805.85 / 263.87 / 32.74 / 849.40 / 173.60 / 20.44
1993 / 1039.59 / 418.33 / 40.24 / 917.44 / 252.37 / 27.51
1994 / 1156.15 / 529.34 / 45.78 / 1210.06 / 347.13 / 28.69
1995 / 1320.78 / 629.43 / 47.66 / 1487.70 / 468.76 / 31.51
1996 / 1388.38 / 756.04 / 54.45 / 1510.66 / 615.06 / 40.71
1997 / 1423.60 / 777.20 / 54.59 / 1827.00 / 749.00 / 41.00
1998 / 1401.66 / 767.17 / 54.73 / 1837.57 / 809.62 / 44.06
1999 / 1657.18 / 858.84 / 51.83 / 1949.31 / 886.28 / 45.47
2000 / 2250.97 / 1172.73 / 52.10 / 2492.12 / 1194.41 / 47.93
2001 / 2436.13 / 1258.63 / 51.67 / 2661.55 / 1332.35 / 50.06
2002 / 2952.16 / 1602.86 / 54.29 / 3255.69 / 1699.37 / 52.20
2003 / 4128.36 / 2319.14 / 56.18 / 4383.74 / 2403.41 / 54.83
2004 / 5614.24 / 3245.57 / 57.81 / 5933.68 / 3386.06 / 57.07
2005 / 6601.19 / 3875.13 / 58.70 / 7619.99 / 4442.09 / 58.29
2006 / 7916.14 / 4726.16 / 59.70 / 9690.73 / 5638.28 / 58.18
2007 / 9562.84 / 5609.54 / 58.66 / 12181.51 / 6958.98 / 57.13
2008 / 11330.86 / 6199.56 / 54.73 / 14285.46 / 7906.20 / 55.35
2009 / 10056.03 / 5452.07 / 54.22 / 12016.63 / 6722.30 / 55.94
2010 / 13948.30 / 7380.01 / 52.91 / 15779.30 / 8623.06 / 54.65
2011 / 17434.60 / 8648.26 / 49.60 / 18986.00 / 9953.30 / 52.42
Source:
In earlier years, the import by the foreign-invested companies was much bigger than export in both volume and percentage. That was because A. Soon after China started to change from the central planning system, everything was in shortage in China so that most of the outputs were consumed in the domestic market. B. The technology in China lagged behind so that the foreign-invested companies had to import more materials and spare parts they needed in production.
Export overtook import by foreign-invested companies in volume since 2003, and in percentage since 2008 because after 30 years of opening up, A. the demand in domestic market was satiated so that many products should find their world markets; B. the technology in China was greatly improved so that many spare parts could be outsourced in China.
Now the share of foreign trade contributed by foreign-invested companies was more that 50% out of the total foreign trade in China. The FDI made great contribution to China’s foreign trade.
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