(5) M&A becomes the new highlight of foreign investment utilization
Transnational M&A is an important investment mean of global MNCs. With the lifting of restriction on foreign investors' acquisition of domestic enterprises, the loosening of the investment fields and the sharpening of market competition, foreign investors begin to change the traditional investment mode and the M&A with the characteristics of high starting-point and scrambling the commanding height in a short cycle branches out gradually. In 2004, foreign businesses' acquisition of domestic enterprises and listed companies become a new highlight of China's foreign investment utilization. For instance, Asahi Beer and ITOCHU CHEMICAL FRONTIER Corporation acquired 50% equity of Master Kong Holding Co., Ltd in this January, becoming the acquisition case with the biggest transaction volume in China's consumer market in recent years.
Several cases of foreign-funded financial institutions' acquisition of the equity of listed banks also occurred in 2004. For instance, Hang Seng Bank acquired 15.9% shares of the Industrial Bank in this April. Xinqiao Investment acquired 17.9% shares of Shenzhen Development Bank in this May and HSBC acquired 19.9% shares of the Bank of Communications in this August.
(6) The secondary industry and manufacturing industry still are the main investment field and the investment quality is improving
With the expiring of the three-year transitional period for China's accession of WTO and the good prospect brought forth by China's economic development, some MNCs have confirmed their new China strategy and accelerated its investment process in China. The scale of foreign investment in most of sectors witnesses growth of different degree. Viewed from the industrial structure of the foreign investor, secondary industry still is the main field of foreign investment and the proportion of foreign investment utilization is upgraded. In 2004, the actual foreign investment utilization is US$45.46 billion in the secondary industry, a growth of 16.0%. It occupies 75.0% of the total foreign investment utilized, up 1.8% compared with that of 2003. The indicators of the tertiary industry witnessed declining.
Manufacturing industry is the major sector of foreign investment in the secondary industry. The contract foreign investment volume and actual foreign investment utilization was US$109.74 billion and US$43.02 billion, taking a share of 71.5% and 71.0% of the national total respectively. The growth rate of the two indicators is 2.5% and 3.1% higher than national average. In the manufacturing industry field, foreign investment inclines to high-tech enterprises and enterprises with high technological added-value and capital added-value in such industries as communication equipment, computer and other electronic equipment manufacturing industries, chemical raw materials and chemical product manufacturing industry, communications and transportation equipment manufacturing industry, special equipment manufacturing industry, non-metal mineral product industry and general equipment manufacturing industry. The actual foreign investment utilization is US$7.06 billion, US$2.66 billion, US$3.77 billion, US$1.90 billion, US$1.84 billion and US$2.17 billion respectively.
The rapid development of Chinese economy and the constant expanding of the market capacity make MNCs regard the China market an important part of its global one. They adjust their China strategy in succession and change China from a "manufacturing factory" into "R&D" base. In 2004, more MNCs established production base, R&D center and more intense commercial network in China. According to incomplete statistics, nearly 200 R&D centers were newly established in China. Presently, there are 700-odd R&D centers established by foreign investors. Of which, 189 are in Beijing and 140 are in Shanghai. The R&D centers are not only important support of the global R&D system of MNCs, but the R&D main body focusing on the China market.
II. Foreign investment utilization forecast of 2006
(1) More solely foreign-funded businesses will come out
Solely investment is good for independent management, intellectual property rights protection, flexibility and adaptation and the implementation of the strategic idea of the headquarters. The drawing near of the late-transitional period and the further open of more fields in the next two to three years will give rise to more foreign-funded businesses. The "Survey Report of the Trend of MNCs' Investment in China in 2005-2007" of the Research Institute of the Ministry of Commerce shows that 57% MNCs tend to solely establish business in production and investment and 46% enterprises tend to establish independent R&D center in R&D investment.
(2) M&A scale is to enlarge
Although the proportion of M&A is not high in China, with the acceleration of the process of capital market, loosening the regulation on the act and quantity of M&A of foreign investment, the M&A market will be more active in 2006. When the service sector is open, foreign investment will adopt M&A to obtain initiatives in order to occupy the market.
(3) Investment quality will be further upgraded
With the sharpening of the competition of international capital in China's market, foreign investors adjust investment strategy and enlarge R&D input in succession, some MNCs will continue to establish regional headquarters and R&D center in China.
(4) Manufacturing industry still is the key of foreign investment
Although the service industry will be further open in 2005 and the investment in the industry will be strengthened, China's manufacturing industry has great development room and strong appealing to foreign investors. As manufacturing industry is a capital-intensive industry, the investment introduction scale to the total investment will continue to grow.
(5) East China still is the key area for foreign investment
Traditional hot soil for foreign investment, including the Yangtze River Delta, Pearl River Delta and Bohai Bay are still the first choice of foreign investors. The implementation of policies for the rejuvenation of old industrial base in Northeast China and the "grow up" of Central China will help Central China to enlarge the investment introduction scale. Although the investment environment is bettering in West China, the infrastructure and condition for the in-flow of large-scale foreign investment still are not satisfying.
