China’s Successful Strategy in Foreign Investment Field

2021/10/02 | Economy, Note, top news

Strategic Council Online-- Opinion: One of the important issues in the international economy is the issue of foreign investment. Foreign investment has advantages such as the transfer and use of technology and the resulting benefits, export development, increase foreign exchange reserves, improve the balance of payments, new business opportunities, increase government tax revenues, etc., which ultimately increase economic growth for the host country.

Yaser Ahmadi Bani-Researcher of the Investment Making and Investment Receiving Committee, Economic Diplomacy Think Tank, Imam Sadeq (AS) University

China is a successful example in the foreign investment debate; Not only has it been successful in attracting foreign investment, but it has also been one of the most successful countries in terms of foreign investment in other countries, thereby increasing its economic power and political influence.

Foreign investment can be considered an opportunity to use the domestic market of the host country or use the host country to export goods produced at a lower price. Based on this, investments made in China can be divided into two parts:

  1. Investment in pursuit of the use of domestic and regional markets of China
  2. Export-oriented investment in which investors in this category are seeking to manufacture goods in the host country in order to export the produce with the lowest costs to global markets

 

Foreign direct investment in China has played a significant role in its economy in recent decades and has greatly contributed to economic growth and trade development, especially in China’s export-oriented manufacturing sector.

Different countries are looking to use China as an expanding economy with cheap resources and labor so that they can be present in both the Chinese market and other global markets. The start of foreign investment in China was through assembly and with the aim of expanding the economy of the country of origin, but China was able to become one of the most successful countries in various fields of technology by using abundant manpower and acquiring knowledge to these forces. In addition, Chinese investments in other countries have been expanded to facilitate the transfer of knowledge from countries with higher levels of technology and science.

China’s foreign investment in other countries

In order to implement its open trade policies, China has turned to investment in different countries and in various fields, policies that are pursued with different goals. One of these goals is to create a market for products made in China; Investing in other countries facilitates China’s foreign relations with them and gives China power and initiative. In addition, it helps China to establish itself as the world’s top economy and to influence the position and hegemony of the United States in various countries. Investments are usually made in the infrastructure of different countries of the world and are not limited to developed countries.

One of China’s foreign investments is port investment, which helps China access cheaper transportation than other competitors. However, China’s investments have been met with reactions from other major powers. Of course, China’s foreign investment is not limited to infrastructure, and there have been huge investments in other areas, especially in the areas of finance and high-tech; China, for example, is one of the largest holders of US bonds.

Comparing investment incoming and outgoing capital in China  

Due to the relative advantage in the production of goods due to cheap labor and facilitative policies, foreign investment in China has continued to rise, but in the case of Chinese foreign investment in other countries, the situation is slightly different and its upward trend stopped suddenly in 2016 and took a downward trend, which can be attributed to the decline in investment in the United States and other countries due to the conflict with the United States, which is known as a trading competitor for China.

Interestingly, China’s foreign investment in 2014 equaled the outflow of foreign capital to China, indicating a two-way, convergent relationship between capital inflows and outflows. In 2015 and 2016, outflows were even higher.

If we look at the accumulation of investments, we will see that China’s outflow capital in 2016 was more than the total accumulated capital accumulation, and this trend continues. The point to be drawn from this is that not only has China not continued to attract foreign investment unilaterally, but it has sought to increase its role in global decision-making by investing in other countries and is merely a source of capital investment other than a mere source for the attraction of foreign investment.. Continuation of this will help China to show its economic power to other competitors and to have a greater impact on global developments.

 

Conclusion

The point of interest in foreign investment is a thorough understanding of capital inflows and outflows, to which China has paid close attention and made the most of both types in order to establish itself as the world’s leading economic power. The People’s Republic of China has not only limited itself to attracting foreign capital, but has always sought to expand its influence in the global arena in various ways, as well as increase its international trade in various ways. Therefore, for this purpose, a special attention has been paid to foreign investments.

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