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(1) Utilization of foreign capital in 2015
By the end of 2015, Zhejiang had approved 55,905 foreign-invested enterprises, with a total investment of US$514.75 billion, a total contractual foreign investment of US$29,066 billion and an actual foreign investment of US$158.65 billion.
The characteristics of Zhejiang’s utilization of foreign capital in 2015 are as follows:
1) CONCENTRATION IN SOME AREAS
In 2015, the contractual foreign investment and actual foreign investment in the five cities in northern Zhejiang, i.e., Hangzhou, Ningbo, Jiaxing and Shaoxing, was US$27.82 billion and US$16.95 billion respectively, accounting for 94.0% and 93.8% of the total of the province, an increase of 5.8 and 3.3 percentage points over 2014 respectively. Specifically, the actual foreign investment utilization in Hangzhou, Ningbo and Jiaxing totaled US$14.03 billion, accounting for 82.7% of the total in the province, making the three the main driving force for FDI attraction in the province.
2) GREAT CONTRIBUTION OF LARGE-SCALE PROJECTS AND CAPITAL
In 2015, Zhejiang approved 131 foreign investment projects that involved over US$30 million of investment each, making a total investment of US$24.39 billion
Regional investment analysis report 2015 101 and contractual foreign investment of US$13.17 billion, accounting for 59.2% and 47.3% of the total respectively. Specifically, 62 projects involved more than USS100 million of investment, making a total of US$13.11 billion and contractual foreign investment of US$5.44 billion. In 2015, the contractual foreign investment increased by US$8.92 billion, accounting for 32.1% of the total, an increase of 5.3% year-on-year.
3) RAPID GROWTH OF INVESTMENT FROM EUROPEAN AND
The Hong Kong SAR remained the largest source of foreign investment, with an actual foreign investment of US$10.7 billion, 63.1% of the total, down 5.1% year-on-year. Contractual foreign investment from the European Union (EU) amounted to US$2.31 billion and the actual foreign investment totaled US$1.99 billion, up by 217% and 265% respectively. Specifically, the actual foreign investment from Germany, the UK, the Netherlands and Luxembourg was USS970 million. USS330 million, US$220 million and US$200 million respectively, a year-on-year increase of 9.9, 5.0, 13.1 and 5.1 times respectively. The actual foreign investment from the United States was US$490 million, an increase of 168.6% year-on-year.
4) IMPROVED INDUSTRIAL DISTRIBUTION
The contractual foreign investment in the secondary industry was US$10.25 billion and the actual foreign investment in the industry was US$7.19 billion, up by 7.6% and 27% year-on-year respectively, and the latter accounted for 42.4% of the total, up from the 37.5% of the previous year. Specifically, the contractual foreign investment in high-tech projects was USS 1.30 billion and the actual foreign investment in the industry was US$1 billion, up by 36.6% and 37.5% year-on-year respectively. The actual foreign investment in the pharmaceutical industry was US$330 million, a fivefold increase from a year earlier. The contractual foreign investment in the tertiary industry was US$17.46 billion and the actual foreign investment in it was US$9.68 billion. The total actual foreign investment, excluding that in real estate, registered a year-on-year increase of 29.5%. The actual foreign investment in the information transmission, computer services and software sendees industry totaled US$1.12 billion, up by 76.2% year-on-year. The actual foreign investment in the financial sendees industry was US$820 million, an increase of 273.2% year-on-year.
5) THE IMPORTANT ROLE OF FOREIGN CAPITAL IN
In 2015, another 692 projects were approved in the development zones in Zhejiang Province, with a total contractual foreign investment of US$15.3 billion and an actual foreign investment of US$9.94 billion respectively, up by 14.6% and
In 2015, Zhejiang welcomed 24 new enterprises established by the Fortune Global 500 enterprises, with a total foreign investment of USS 1.52 billion and a contractual foreign investment of USS900 million. Specifically, the total investment and the contractual investment in Pfizer Biologies (Hangzhou) Co., Ltd. by Pfizer Inc. reached USS300 million and US$100 million respectively; both the total investment and the contractual foreign investment of Mega Bank to establish its Ningbo branch was US$162.8 million. By mid-2016, Zhejiang Province had approved a total of 526 investment enterprises established by 174 of the world’s top 500 companies, with a total foreign investment of US$26.6 billion and a total contractual foreign investment of US$10.8 billion.
(2) Outward investment in 2015
By the end of 2015, a total of 7,816 overseas enterprises and institutions were approved or filed in Zhejiang Province, with an accumulated OFDI of US$41,719 billion.
In 2015, Zhejiang enterprises invested in a total of 163 projects in BRI countries with an outward investment of US$4.4 billion, an increase of 3.8 times.
The outward investment of Zhejiang Province in 2015 showed the following characteristics:
1 A large number of large-scale projects
In 2015, Zhejiang Province invested in 29 overseas projects of over US$100 million with an investment of US$9.94 billion, accounting for 71.5% of the total.
2 Various measures for OFDI to provide strong support for supply-side reform
Zhejiang has invested in 135 overseas projects by means of M&A with an amount of US$5.11 billion, with the average M&A amount of individual project up by 1.4 times year-on-year. The outward investment in technology R&D reached USS 1.74 billion, an increase of 13.9 times.
3 Faster OFDI in the e-commerce sector
In 2015, Zhejiang Province invested in 30 projects in the e-commerce sector, with an investment of about US$150 million. Specifically, 25 enterprises set up their overseas warehouses, established e-commerce platforms or acquired e-commerce companies for technology sendees, with a total investment of about US$45 million.
4 Steady development of international economic cooperation and large market shares held by large enterprises
Zhejiang Province had Zhejiang Construction Investment (S) Pte Ltd. and 30 other large enterprises with over US$50 million in annual turnover, making a total turnover of US$4.18 billion. In fact, 10.6% of enterprises qualified for overseas project contracting completed 67.7% of all overseas projects contracted by turnover. The total turnover in Asia and Africa was US$2.19 billion and US$2.12 billion respectively, both registering an increase of about 19%, accounting for 69.7% of the total when combined. The total turnover of Zhejiang enterprises in BRI countries reached US$1.88 billion, accounting for 30.5% of the total, an increase of about five percentage points over 2014.
(3) Prospect for the 13th Five-Year Plan period
Zhejiang Province made remarkable achievements in outward investment and the utilization of foreign capital in 2015, contributing to the economic growth and industrial transformation and upgrading of the province. Nevertheless, it faced the following problems: First, the structure and quality of foreign investment need to be further improved, the service sector should open wider to the outside world and the foreign investment in producer sendees and high-tech industries needs to increase. Second, the province is not attractive enough to foreign investment in the future. As various provinces in the Chinese Mainland stepped up their investment attraction efforts, and as the costs of land and labor grew, Zhejiang Province’s competitiveness in attracting foreign capital weakened and the reserve of new projects was limited. Third, the environment for utilizing foreign capital needs to be improved, as there are a limited number of high-quality service platforms and the talents to attract investment. Fourth, there are insufficient interactions between going-global and bringing-in efforts. Enterprises with global presence have not brought in high-end production facilities, advanced technologies or resources. During the 13th Five-Year Plan period, Zhejiang Province will face a new landscape in outward investment and its utilization of foreign capital.
The global economic landscape and rules are changing faster. First, the United States has been pushing forward multilateral agreements such as the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) the and the Trade in Seivices Agreement (TISA) in an effort to dominate the new international economic and trade rules, resulting in higher barriers to countries out of certain regions. At the same time, global investment liberalization has been promoted. A total of 87 foreign investment policies and measures were issued in 59 countries and economies in 2013, and 61 of them were related to the liberalization, promotion and facilitation of investment, according to World Investment Report 2014 of UNCTAD. $econd, the United $tates and other developed countries pushed re-industrialization and Southeast Asian countries stepped up investment attraction efforts based on the advantage of labor costs, forcing China to improve the quality of its utilization of foreign capital and to accelerate the transformation toward innovation-driven development. Third, the global economic growth pattern undergoes deep changes. While the U.S. economy is recovering and a new round of interest rate hikes was launched, its foundation is not solid enough and the follow-up policies remain uncertain. The economic growth of Europe and Japan slowed down and faced deflationary pressure. Capital is obviously flying from emerging markets, and as the world economy is confronted with mounting uncertainty, Zhejiang Province is facing growing uncertainties about its outward investment and utilization of foreign capital.
China has rolled out strategies for further opening-up in an all-round way. First, the concept of innovative, coordinated, green, open and shared development put forward at the Fifth Plenary Session of the 18th CPC Central Committee and the full implementation of opening-up strategies such as the Belt and Road Initiative and free trade zone development initiatives have created new opportunities for Zhejiang to invest overseas and utilize foreign capital. Second, pilot free trade zones, as national strategic platforms with the most favorable policies, have become the main destinations of foreign capital and important service platforms for outward investment. Third, as China speeds up its transformation to innovation-driven and consumption-driven development, with great market potential, especially with the further relaxation of access to the service market, the service sector is expected to become a new area for utilizing foreign capital in Zhejiang during the 13th Five-Year Plan period. Fourth, the two-way opening-up of the financial services industry and the internationalization of RMB have opened up new space for international capital flows and made indirect investment of funds and equities more active.
Zhejiang stepped up its efforts to build an open economy. First, with the close attention of the CPC Zhejiang Provincial Committee and Zhejiang Provincial People's Government, Zhejiang Province formulated a plan for the development of an open economy for the first time and listed it as one of the key special plans during the 13th Five-Year Plan period. Second, the strategic platforms for the development of an open economy have become stronger. Zhejiang is moving faster to build major opening-up platforms such as Zhoushan river-ocean transportation hub, the China (Hangzhou) and China (Ningbo) cross-border e-commerce comprehensive pilot zones, the Yiwu-Ningbo-Zhoushan open channel and the pilot zone for the private sector’s participation in the BRI. Third, enterprises are moving faster into the international market. Zhejiang enterprises urgently need to carry out overseas investment, strengthen cooperation with multinational companies and allocate resources around the world. At the same time, the overseas investment activities of Chinese enteiprises have started to bring dividends. Many local multinational companies have begun to come back with technology, capital, management expertise and other resources accumulated overseas and make investment in China. Fourth, important international conferences and events such as the G20 Summit and the Asian Games create great opportunities for Zhejiang enterprises to go global.
Generally, the 13th Five-Year Plan period is crucial for Zhejiang to expand its opening-up and improve international competitiveness in an all-round way. It
Regional investment analysis report 2015 105 is also important for the supply-side structural reform and the modernization of the governance system and governance capability.