Concerns sparked by Citizen Holdings, Microsoft closures not backed by data
China's Ministry of Commerce (MOFCOM) on Thursday denied that a large number of foreign firms were moving their capital out of China, after some multinationals closed their plants or stores in the country.
Japan's Citizen Holdings closed its watch parts factory in Guangzhou in February. Microsoft said in December that it would shut down two Nokia plants in Beijing and Dongguan in South China's Guangdong Province in the first quarter. These two cases raised concerns over the outflow of foreign investment.
"There is no mass capital withdrawal of foreign enterprises in China that can be detected in economic indicators," Shen Danyang, a spokesman for MOFCOM, told a press conference held in Beijing.
Foreign direct investment (FDI) into the Chinese mainland rose by 11.3 percent year-on-year in the first quarter of this year. In March, FDI grew by 2.2 percent from a year earlier, data from the MOFCOM showed Thursday.
Meanwhile, the number of foreign enterprises that ceased operation in the mainland dropped by 17.6 percent in the first quarter from a year earlier, while the number of foreign firms that reduced investment also fell by 35.7 percent year-on-year, according to Shen.
"Only a minority of foreign companies left China because they could not adjust to China's new normal such as rising labor costs and the economic slowdown," he said. "That was far from a widespread phenomenon."
In Shanghai, high land and labor costs weakened FDI into new manufacturing projects in the first quarter, but FDI into the services sector is still robust, Hao Le, an expert with the Shanghai Foreign Investment Development Board, told the Global Times Thursday.
Feng Pengcheng, a professor at the University of International Business and Economics in Beijing, said that many countries have gone through a similar process to what China is now experiencing.
"Labor-intensive and low-tech multinationals are turning to other lower-cost locations as production costs rise in China, and China is increasingly preferring high-tech and environmentally friendly foreign enterprises amid its structural reform," he told the Global Times Thursday.
"But to attract more high-end foreign-invested projects, China needs to further improve its intellectual property rights environment," Feng said.
In terms of foreign trade, Shen said the ministry is confident that China will achieve stable export growth this year, after China's exports contracted by 15 percent year-on-year in March.
The number of overseas buyers at the ongoing spring session of the China Import and Export Fair, seen as a barometer of China's exports, also fell by 13.5 percent from last year's spring session, data released by the fair's organizer showed Thursday.
"The government is expected to launch more policies, including tax rebates, to support trade growth," economists from ANZ Banking Group wrote in a note on Monday.
However, Shen said there is no need to panic about first-quarter foreign trade data.
"China has launched measures to stabilize foreign trade since 2014, and our focus is the implementation of these policies rather than a rush to roll out new ones," he noted.
