China’s Actual Utilized Foreign Capital Reached New High in 2022

By Lily Wang

In 2022， Chinas actual utilized foreign capital reached a historical high. According to the data released by the State Council Information Office， Chinas actual use of foreign capital continued to increase in 2022， reaching RMB 1.2 trillion， which is a new high historically.

More than 90% of foreign enterprises in China focus on the Chinese market

Foreign investment in the manufacturing industry reached RMB 323.7 billion， surging 46.1% year-on-year. Particularly due to the removal of foreign investment limits on auto JV， the foreign invest- ments in auto industry increased by 263.8%.

According to the analysis by the Ministry of Commerce， more than 90% of foreign enterprises in China focus mainly on the Chinese market. China has a population of 1.4 billion people and is the worlds second-largest consumption market. New consumption models have been emerging and market potential has been unleashed. It is said that this year China will place special focus on restoring and expanding consumption， and the market scale will enlarge further. There will be more foreign enterprises to invest in China.

The actual use of foreign investment keeps growing. “The actual use of foreign capital reached RMB 1.2 trillion in 2022， up by 6.3%. This shows that China is still an investment hot-spot for foreign investors，”said Deputy Commerce Minister Guo Tingting. The quality of attracted investment has been improving. The investment in the manufacturing industry increased by 46.1%， accounting for 26.3% which is 7.8 percentage points higher than 2021； the attracted investments in hightech industry increased by 28.3%， accounting for 36.1% which is 7.1 percentage points higher than last year. The main source of investment has seen increasing investment. Investment from Germany， South Korea and the U.K. has been growing by 52.9%， 64.2% and 40.7% respectively. The high ground of opening-up has had a good effect， and the 21 free trade experiment zones attracted a total of RMB 222.52 billion， accounting for 18.1% of the whole country； the 230 national economic development zones attracted a total of RMB 259.64 billion， accounting for 21.1% of the whole country.

The physical-store retail has been growing， and retail sales of goods in physical stores above the designated size increased year-onyear， consumption scenarios continued to expand， and consumption experience has been further improved. The upgrading of consumption demands has been making progress. The auto market witnessed the sales of 26.864 million new vehicles last year， up by 2.1% year on year and ranking first in the world for 14 consecutive years. Among them， the new energy vehicles had the best performance， with domestic sales and export increasing by 93.4% and 131.4% respectively. The penetration rate of new energy vehicles reached 1/4， achieving the national planning goal three years early.

New highlights in Belt and Road cooperation

In 2022， the overall business operation has been making steady progress and made positive contributions to the stability of the overall economic and social situation. Foreign trade was better than expected， and the goal of maintaining stability and improving quality has been successfully achieved. Li Xingqian， Director of the Department of Foreign Trade of the Ministry of Commerce， said that， on the whole， Chinas foreign trade had made outstanding performances in three aspects last year.

The first is that the trade volume has reached a new high. In 2022， the scale of Chinas import and export reached a new height amounting to RMB 42 trillion， which is a new breakthrough over the high base in 2021. China has maintained its position as the worlds largest country in trade of goods for six consecutive years. At the same time， the trade structure continued to be optimized， and the proportion of imports and exports of private enterprises has in- creased， of which the proportion of exports increased by 3.2 percentage points to 60.8%. Bilateral and multilateral economic and trade cooperation has made positive progress. Exports to RCEP trading partners increased by 17.5% year-on-year， 7 percentage points higher than the overall growth rate.

The second is that new growth momentum has been unleashed. Chinas high-tech， high-value-added and green-oriented products， such as electric vehicle， photovoltaic products and lithium batteries， have become new growth points for exports. In 2022， the export of electric vehicles increased by 131.8%， photovoltaic products by 67.8% and lithium batteries by 86.7%. At the same time， new forms of foreign trade such as cross-border e-commerce and market procurement trade have also been booming， with the import and export scale of more than RMB 3 trillion， accounting for more than 7% of foreign trade.

The third is that new contributions have been made. Domestically， foreign trade has made important contributions to the overall economic recovery. The annual contribution rate of net exports of goods and services to GDP growth reached 17.1%， driving GDP growth by 0.5 percentage points. There were 598，000 foreign trade enterprises with import and export record in 2022， an increase of 31，000 compared with 2021， effectively promoting Chinas job stability and employment. Internationally， against the backdrop of the turbulent global economic and trade environment， China has taken effective measures to ensure the smooth operation of global industrial and supply chain. At the same time， China has actively expanded its imports， with an annual import scale of USD 2.7 trillion， making great contributions to the development of global economy and trade.

The consumption market has been stable. The total retail sales of consumer goods in the whole year reached RMB 44 trillion， basically the same as that in 2021. The development trend of new consumption is good. Online retail sales of physical goods increased by 6.2%， accounting for 27.2% of the total retail sales. During the past Spring Festival， the market continued to show strong growth momentum， and the sales of key retail and catering enterprises nationwide increased 6.8% over the same period last year.

Foreign financial institutions feel optimistic about Chinese economy

In fact， in the eyes of many foreign financial institutions， the current world economy is facing complex challenges. Chinas economy is one of the few positive factors that boost global expectations and is the“key driving force” to promote global economic growth.

A few days ago， the International Monetary Fund （IMF） released the updated content of the World Economic Outlook Report， significantly uplifting Chinas economic growth forecast to 5.2% this year.

Other large international financial institutions have also raised the forecast for Chinas economic growth in 2023： Morgan Stanley lifted the forecast from 5% to 5.7%， Goldman Sachs lifted the forecast from 4.5% to 5.5%； Nomura Securities raised the forecast from 4.8% to 5.3%； JP Morgan， UBS and Deutsch Bank have also raised the forecast to the Chinese economy.

Raising the growth forecast of Chinas economy manifests the confidence of foreign financial institutions towards the Chinas economy.

In contrast， all parties in the international financial market are not so optimistic about the global economic outlook in 2023： the IMF expects the global economic growth rate to be 2.9% in 2023； according to the World Economic Situation and Prospects for 2023 released by the United Nations， the global economic growth is predicted to be 1.9%. The World Bank is also predicting that the global economic growth rate will decrease to 1.7% in 2023.

“Chinas economic recovery this year may be the main hedge against the risk of global economic recession，” said Yu Xiangrong， Chief Economist of Citigroup China.

In fact， during the three years of the global spread of the COVID-19 pandemic， China， as the worlds second largest economy， has always been the main force of world economic growth： in 2020， China became the worlds first major economy to achieve positive economic growth； in 2021， the scale of Chinas economy exceeded RMB 110 trillion， accounting for 18.5% of the world economy， with an average growth of 5.1% in two years； in 2022， Chinas economy overcame many difficulties and achieved a year-on-year growth of 3%， faster than most major economies.

Now the world is placing high hopes on Chinas economy again.“China is the worlds only major economy that will achieve positive growth in terms of corporate profits and GDP in 2023. This is good news for the world economy， as it avoids the possibility of world economic recession in the backdrop of slow economy in the U.S. and Europe.”This is a statement on the website of Barrons， an international renowned financial magazine.

Although in the second half of 2022， the global financial market was greatly turbulent， causing largescale outflow of funds from Europe， Asia， South America and other plac- es. But foreign financial institutions generally believe that the factors that cause great pressure on them are decreasing， which will further stimulates their investment in Chinas financial market.

The Bank of America has tactically increased its investment into Chinas stock market； Morgan Stanley is optimistic about Chinas stock market and “suggests taking advantage of the current opportunity to buy on the low”； the equity strategy team of Goldman Sachs has raised the earnings growth expectation of MSCI China Index in 2023 from 8% to 17% in recent two months.

According to the statistics of the State Administration of Foreign Exchange， in December 2022， the net increase in domestic bonds and stocks held by foreign investors reached USD 7.3 billion and USD 8.4 billion respectively. In the first half of January， 2023， the net purchase of domestic stocks and bonds by foreign investors totaled about USD 12.6 billion.

“China is shifting from pursuing high-speed growth to pursuing high-quality development， and paying more attention to the quality of economic growth，” Goldman SachsPresident and Chief Operating Officer John Waldron said in December last year. “Goldman Sachs has always been an important investor in the Chinese market， and will continue to invest heavily in China in the future. We are very optimistic about Chinas future development prospects.”

“China has unswervingly promoted high-quality development， deepened reform and opening up， especially continued to promote financial opening up to a higher level， which has provided huge development opportunities for foreign financial institutions.” Zhang Xiaolei， President and Vice Chairman of Standard Chartered Bank （China）， said that especially in the past three years， Standard Chartered China has achieved sustained growth in its performance thanks to Chinas development and opening up opportunities. Many of its business sectors have achieved breakthrough growth.