A： Internationally investment growth from developed countries like the US, Japan and European Union countries is fluctuating in our country's absorption of foreign investment at present. It can be seen from the US's balance of international payments that since 2005 the US enterprises' direct foreign investment has shown an obvious downward trend – in 2005 the US's actual investment in China dropped 22%, and from January to September in 2006 it decreased by 14%, and at the same time there has been a huge backflow of the capital of multinational companies to the US. The trend is likely to continue, and the US's direct investment in China will still be affected. Meanwhile, the ability of emerging developing countries to absorb foreign capital has been substantially strengthened, especially India which will see dramatic improvement. The rise of neighboring countries has formed tremendous competition pressure on China's introduction of foreign investment.
Domestically speaking, though it is now generally believed that China's economic growth will slow down this year, it does not mean that economy will turn downward; the overall growth trend will remain and on the whole the investment environment is favorable, except that there still exist some obvious constraints in absorbing foreign investment: firstly the cost advantage is weakened , and secondly some policies to regulate foreign investment utilization have been introduced by our country one after another, which will directly impact this year's foreign investment in real estate and in merger and acquisition business. Moreover, the gradual execution of the domestic policy of two tax integration has caused some overseas enterprises that originally had investment plan to wait and see. Of course, in realizing integrated expansion, multinational companies care most about factors like infrastructure, industrialization level and market capacity rather than preferential policies. Consequently adjustment in tax preferential policy is unlikely to scare foreign investment away. Nonetheless, small businesses are more sensitive to adjustments in preferential policies.
Furthermore, worldwide some elements that highly impact the flow of international capital requires our close attention: firstly, international capital is more selective with regard to governmental credibility, property relations, legal enforcement, technical standards and cultural environment; secondly, equity investment, shareholding requirements and sole ownership become more and more important; thirdly, the sole dependence on financial subsidies and preferential tax policies to absorb foreign investment will be limited to some extent; and fourthly, human resources is likely to become a critical differentiator in terms of attractiveness of various countries. |
