China's economic slowdown and rising labor costs haven't dampened foreign investors' confidence in the world's second largest economy.
Many foreign investors are upbeat over the opportunities afforded by the growing domestic market for consumption, according to a report released by the Department of Commerce of Zhejiang Province and the Financial Times on Tuesday.
The growing domestic market has emerged as the top attraction for foreign investors, with a stable policy environment and sound industrial infrastructure also bolstering confidence, the report found after interviewing 150 senior managers from foreign companies.
"There is no doubt that China is entering a new phase of development with slower growth, but that does not necessarily mean that there are no investment opportunities. The emerging domestic market for consumption is one feature of China's new normal growth and is open for foreign investment," said Yu Bin, a senior researcher with the State Council's Development and Research Center.
Yu added that China's opening up projects, such as the Belt and Road Initiative, offer foreign companies entry points for cooperation along the upper part of the global industrial value chain.
About 44.6 percent of the surveyed companies said that they would increase investment in China this year, citing the attraction of high-end manufacturing, and goods and services for domestic consumers.
The report found that foreign investors felt that headway achieved by the government to improve and streamline processes was the most remarkable progress last year.
The Ministry of Commerce said last month that its major tasks in 2015 included pushing for opening up, cutting red tape around foreign investment and developing pilot projects on liberalized trade restrictions.
"It is probably the best time ever to invest in China because it is more predicable and easier to understand the market dynamics. We can understand the government policies better than we did ten years ago and it's easier to make long-term plans," said E. Allan Gabor, president and CEO of Merck Serono China, a German pharmaceutical company, which has a R&D center in Beijing and is building its second largest plant in the eastern city of Nantong.
Foreign direct investment (FDI) to the Chinese mainland jumped 11.3 percent year on year in the first three months of 2015 to 34.88 billion U.S. dollars.
During the same period, China's growth slowed to 7 percent year on year, the lowest quarterly growth rate since 2009, prompting concerns of possible capital outflows.
"The ups and downs of these economic numbers, if seen from a long-term perspective, are just bumps in the road for China as it goes from a low-cost production country to a high-end innovation country," said Edward Buckingham, a management professor with the University of Nottingham Ningbo China.
The report pointed out that a lack of talents in may hinder economic growth and called for more targeted investment policies and sophisticated services to meet foreign investors' demands.
"Developing an innovative market environment relies on the education and training of talents, and promotion of entrepreneurialism. High-tech startups are on the rise here, and they are not just copying other countries' or companies' ideas, but making their own. This is a positive trend," Buckingham said.
