I. Basic situation of China's foreign investment utilization

(1) Enlarged scale and accelerated speed
In 2004, Chinese economy has maintained a rapid growth momentum. Although China adopted macro adjustment of the overheated investment, such adjustment has not slowed down the step of foreign investments' entry of the Chinese market and China still is a hot soil for Foreign Direct Investment (FDI). A total of 43664 foreign-funded enterprises were approved to set up in 2004, a growth of 6.3% compared with that of 2003. The contract foreign investment volume was US$153.48 billion, a growth of 33.4% year-on-year and a drop of 5.6% compared with that of 2003. The actual foreign investment utilization volume was US$ 60.63 billion, a growth of 13.3% year-on-year and 11.9% percentage point higher than that of 2003. Such a growth speed is the biggest since 1995 and only next to the 15.1% in 2001.

According to the bulletin promulgated by UN Conference on Trade and Development in January 2005, the FDI volume was US$ 612 billion in 2004, a growth of 5.5% compared with that of 2003. This is the first rise up of FDI after the continual reduction since 2001. The speed of China's absorption of foreign investment is higher than that of global average. The actual foreign investment utilization volume is only next to that of U.S (US$121 billion) and occupies 9.9% of that of the global volume and a 0.7% higher than that of 2003.

(2) The investment from major investment source countries/regions shows a growing trend

In 2004, the number of newly established foreign enterprises and the contract foreign investment volume of 10 Asian countries/regions increased 5.7% and 24.3% respectively. The number of newly established foreign enterprises and the contract foreign investment volume of 15 countries of European Union increased 16.8% and 42.8% respectively. The number of newly established foreign enterprises and the contract foreign investment volume of three major free ports increased 18.1% and 52.8% respectively. The number of newly established foreign enterprises and the contract foreign investment volume of the U.S and Canada increased -0.83% and 22.1% respectively. Viewed from the growth of the foreign investment input actually, the growth of 10 Asian countries/regions, 15 countries of European Union, major free ports is 10.0%, 7.9% and 29.8% respectively and the growth speed up 5.4%, 1.9% and 36.5% respectively compared with that of 2003; only the U.S and Canada reduced 4.4% compared with that of last year but the descending slows down gradually. Viewed from the proportion change, the investment volume of 10 Asian countries/regions, 15 countries of European Union and the U.S and Canada to the total investment volume descended 1.9%, 0.4% and 1.4% respectively compared with that of 2003 and the proportion for three major free ports increased 2.1%.

Remark: 10 Asian countries/regions refer to China Hong Kong, Taiwan, Japan, Philippine, Thailand, Malaysia, Singapore, Indonesia and South Korea; 15 countries of European Union refer to Belgium, Denmark, U.K, Germany, France, Ireland, Italy, Luxemburg, Netherlands, Greece, Portuguese, Spain, Australia, Finland and Sweden; three free ports refer to Virgin Islands, Cayman Islands and Samoa.
China Hong Kong and Virgin Islands occupies the top two positions on the ranking of country/region having investment in China in 2004. The rank of South Korea changed from the 4th place to the 3rd. The rank of Cayman Islands changed from the 9th place to the 7th, while the rank for Japan, Singapore and Samoa changed from 3rd, 7th and 8th to the 4th, 8th and 9th. (See Table 2). In recent years, the ratio of the actual investment volume of top 10 countries/regions having investment in China to the actual utilization sum shows a trend of descending and drops from 86.5% in 2002 to 83.7% in 2004.

(3) Foreign investment utilization of East China, Central China and West China grow all-roundly and Northeast China become a hot soil for investment

Foreign investment utilization of East China, Central China and West China grew all-roundly in 2001. A total of 37 978 foreign-funded enterprises were newly established in East China, a growth of 5.0% year-on-year. The contract foreign investment volume was US$132.43 billion, a growth of 31.7% year-on-year. The actual foreign investment utilization was US$52.21 billion, a growth of 13.6% year-on-year. A total of 3771 foreign-funded enterprises were newly established in Central China, a growth of 18.7% year-on-year. The contract foreign investment volume was US$13.13 billion, a growth of 37.4% year-on-year. The actual foreign investment utilization was US$6.68 billion, a growth of 14.6% year-on-year. A total of 1915 foreign-funded enterprises were newly established in West China, a growth of 9.7% year-on-year. The contract foreign investment volume was US$7.93 billion, a growth of 58.9% year-on-year. The actual foreign investment utilization was US$1.74 billion, a growth of 1.2% year-on-year.

After the nation adopts the strategy of rejuvenating old industrial base in Northeast China, the agreeable industrial development basis and investment environment is improving constantly, making the base a hot soil for foreign investment. The foreign investment growth in Northeast China was far higher than the national average in 2004.

A total of 3072 foreign-funded enterprises were newly established in Liaoning, Jilin and Heilongjiang, the contract foreign investment volume was US$10.68 billion and the actual foreign investment utilization was US$5.94 billion, a growth of 9.3%, 40.1% and 78.0% respectively. The actual foreign investment utilization takes a share of 9.8% in the foreign investment utilization volume of the whole country, up 3.6% compared with that of 2003.

(4) More solely-funded enterprises are established

With foreign investors' familiarity and further understanding of China's economic and social environment, the mode of foreign investment in China is also changing. Solely-funding and controlling has gradually replaced the original joint venture and contractual mode and begins to take a leading position. Especially after China's accession to WTO, more and more enterprises want to establish solely funded enterprises. Some MNCs change joint venture into solely foreign-funded enterprises. In 2004, solely foreign-funded enterprises continue to maintain a high-speed growth. The project number, contract volume and actual utilization increase 14.0%, 43.7% and 20.5% respectively, 7.7%, 10.3% and 7.2% higher than the national average of the three indicators. The ratio of the three indicators of solely foreign-funded enterprises to that of national total is 70.3%, 76.4% and 66.3% respectively, up 4.7%, 5.5%, 4.0% compared with that of 2003.

The year of 2004 is the third year after China's accession to WTO. Many previous joint ventures as, P&G, Avon, Panasonic, Unilever and Siemens changed into solely-funded enterprises.