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(1) Recent policies of Anhui to promote inward and outward investment
These policies mainly include the Implementation Plan for Anhui Province to Participate in the Development of the Silk Road Economic Belt and the 21st Century Maritime Silk Road, the Implementation Opinions on Promoting International Capacity and Equipment Manufacturing Cooperation in Anhui Province, the Guiding Opinions of General Office of Anhui Provincial People’s Government on Supporting Enterprises to Go Global for Transnational Business, the Administrative Measures for the Approval and Filing of Foreign Investment Projects in Anhui Province and the Administrative Measures for the Approval and Filing of Overseas Investment Projects of Anhui Province, etc.
In 2015, Anhui actually utilized US$13.62 billion of foreign direct investment, accounting for 10.8% of the total of China, 0.5 percentage point higher than in 2014. It maintained a relatively high growth rate of 10.4%, 5.1 percentage points lower than in 2014. but 5 percentage points higher than the national average.
i) Strong growth in foreign investment in the manufacturing industry. The proportion of foreign capital utilized by the primary, secondary, and tertiary industries in Anhui was respectively 2%, 59% and 39% of the total. The secondary industry used US$8.02 billion, an increase of 26.1%. This included US$2.73 billion in strategic emerging industries, up by 27.5% and accounting for 20.1% of the province’s total, up 2.7 percentage points over 2014. The tertiary industry used US$5.34 billion, a drop of 5.9%, US$340 million less than 2014. US$320 million of this was utilized by the real estate industry, down 10.4% or US$380 million less than in 2015. This is the main reason for the decline in foreign capital utilization by the tertiary industry as a whole.
ii) Fast growth in foreign investment in Wanjiang Demonstration Area. Up to 14 cities with districts within their jurisdiction in Anhui Province saw a year-on-year growth in their utilization of foreign capital. The foreign investment utilized by Hefei, Wuhu, Ma’anshan. Bengbu and Chuzhou (for the first time) all exceeded US$1 billion. Xuancheng utilized US$800 million of foreign capital, an increase of 15.4%, the highest growth in the province. The actual foreign investment in the Wanjiang Demonstration Area accounted for 70% of the province’s total and reached US$9.53 billion, an increase of 12.3%. The six cities in northern Anhui utilized a total of US$3.72 billion of foreign capital, a rise of 12.4% over the previous year. The foreign investment utilized by counties in Anhui amounted to US$5.16 billion, up 12.9%; foreign investment utilized by development zones at or above the provincial level reached US$7.92 billion, up 17.2%.
Hi) Rapid growth in investment from America and Europe. Large investment of over US$500 million mainly came from: the Hong Kong SAR (US$7.66 billion, 56.2% of the total, down 0.3%, which was the first negative growth ever); the British Virgin Islands (US$910 million, up 71.2%); the United States (USS810 million, up 18.3%); Taiwan of China (US$760 million, down 6.8%); Japan (US$600 million, up 11.3%); and Europe (US$1.34 billion, up 56.7%). The sharp rise in investment from Europe was mostly the result of increases in investment from Italy, the United Kingdom, France and Ireland.
iv) Increase in new foreign investment projects. There were 289 new foreign investment projects, with a contractual investment of US$3.94 billion, an increase of 12.9% and 26.6% respectively. The average investment amount of each project was US$13.63 million, up 12.2%. Specifically, there were 70 projects
Regional investment analysis report 2015 167 over US$10 million in contractual investment, making a total of US$2.26 billion, an increase of 6.1% and 26% respectively over the previous year. Fortune Global 500 enterprises like Samsung of the Republic of Korea and Bosch of Germany set up seven enterprises in Anhui in 2015, and accumulatively, a total of 72 Fortune Global 500 enterprises had invested to set up 120 enterprises in Anhui.
2) OVERSEAS INVESTMENT
In 2015, the actual outward investment of Anhui enterprises stood at US$970 million, an increase of 1.1 times. There were 133 newly approved overseas investment enterprises with an agreed outward investment of US$2.82 billion, up 33% and 56% respectively. Regardless of great fluctuations in overseas investment, the overall trend is positive.
i) Effective promotion of international capacity’ cooperation. Enterprises in the fields of building materials, automobiles, agriculture and mineral resources development accelerated their pace in international capacity cooperation. To be specific, Anhui Conch Group Co., Ltd. invested more than US$400 million in Southeast Asia, and had projects under constiuction in Indonesia’s South Kalimantan Island, Pelabuhan Merak, and West Papua and Kyaukesh of Myanmar. CRCC-Tongguan Investment Co., Ltd. invested USS 1.7 billion in a copper project in Ecuador. Chery invested US$300 million in a car project in Brazil, which had been completed and put into operation. Throughout the year, Anhui enterprises signed contracts for 46 projects over USS10 million in value each with BRI countries and the contractual investment amounted to US$2.97 billion, up by 15% and 26.1% respectively.
ii) Rapid development in cross-border M&A. Efort Intelligent Equipment Co., Ltd. intends to acquire 70% equity of Italy’s CMA, which is the world’s first supplier of self-learning spraying robots. Anhui Zhongding Sealing Parts Co., Ltd. intends to acquire 100% equity of Germany’s WEGU, whose seismic and noise reduction technology is top in the world. Guochuang Software Co., Ltd. intends to set up a wholly-owned subsidiary in Tokyo, Japan, for system design, software development and sales.
Hi) Deepening cooperation with key countries. Relying on the cooperation mechanism between the upper and middle reaches of the Yangtze River and the Federal Region along the Volga River of Russia, Anhui sought cooperation with Russian partners in many areas, maintained direct contact with 12 entities along the Volga River, and established friendly ties with Nizhny Novgorod Oblast. The two sides paid 181 mutual visits and signed 41 cooperation agreements including that for the investment project of Anhui Conch Group Co., Ltd. in Ulyanovsk. During the visit of the Chinese Premier and German Prime Minister to Anhui, eight important cooperation agreements were signed, under which the two sides would actively promote cooperation in the fields of economy, trade,
finance, science and education, urbanization, agriculture, tourism and culture. There are 55 key projects in the fields of automobile, equipment manufacturing, chemical, science, education and culture in the project database for cooperation between Anhui and Germany.
In 2015, though some achievements were made in the utilization of foreign capital and overseas investment, Anhui still had some difficulties and problems. First, there was weak driving force arising from big foreign investment projects. By the end of 2015, only 71 Fortune Global 500 enterprises were present in Anhui, while there were 219 in Sichuan, 167 in Hubei and 84 in Henan. Second, the structure of foreign investment in the service sector needs to be improved. In 2014, the growth in the foreign investment utilized by the service sector reached 87.7%, yet it was -5.9% in 2015. The main reason is that the structure of foreign investment utilization in the sendee sector was unreasonable with excessive dependence on real estate. Trade and social public services saw rapid growth of foreign investment but the total amount remained low. Third, the business environment was poor in some of Anhui’s target countries for overseas investment. Some factors such as an unstable political situation, imperfect legal system and changing policies in some countries and regions of Africa and South America affected the implementation of some projects. Fourth, strong market players were lacking. On the one hand, the province was short of strong large enterprises, advanced technologies and industries, making it difficult for it to undertake large foreign investment projects. On the other hand, Anhui remained dependent on several large enterprises and large projects for overseas investment. Fifth, the overall economic environment was not veiy good. The global economic downturn, downward pressure at home, and a variety of production and management pressures faced by many domestic and foreign enterprises led to a decline in investment intention and a slowed pace of development.
4) PROSPECTS FOR 2016
At present, Anhui is still in a stage of rapid development of new industrialization, urbanization, informatization and agricultural modernization, cradling huge potential domestic demand. China has accelerated the implementation of the "three major strategies” for regional development, which is conducive to the all-round opening-up of Anhui. Therefore, Anhui is currently in a golden period of development. At the same time, it must be seen that the world economy will continue with weak recovery, and the trend in major economies diverges, causing great uncertainty and instability. International relations are unprecedentedly complex, and the external demand is shrinking. The year 2016 is the beginning of our battle to secure a decisive victory in building a moderately prosperous society in all respects and the year of tackling the difficulty in comprehensively implementing the Action Plan for Adjusting Structure, Changing Modes and Promoting Upgrading. Under the new situation of opening-up, Anhui should seize the opportunity,
Regional investment analysis report 2015 169 build up internal strength and step up its efforts to encourage innovation. To overcome the difficulties, it should focus on the following tasks.
First, Anhui should earnestly carry out research on foreign capital utilization and overseas investment, and work out its 13th five-year plan for foreign investment. Second, while folly and faithfolly implementing the BRI, the province should actively promote international capacity cooperation and build a new pattern of opening-up. Third, Anhui should work hard to accelerate the establishment of a new open economic system, further eliminate institutional obstacles, actively explore new models, new paths and new systems for overseas economic cooperation, and work harder to build new advantages in international cooperation and competition. Fourth, it should explore and study the management model of pre-establishment national treatment plus a negative list, and actively promote the experience of the China (Shanghai) Pilot Free Trade Zone. Fifth, it should get actively involved in industrial transfer and division of labor and cooperation in the Yangtze River Economic Belt, and attract foreign investment to strategic emerging industries and modern service industries. Sixth, it should strengthen macro-guidance and services for overseas investment activities, actively promote Anhui-Russia and Anhui-Germany cooperation, and support enterprises to issue bonds abroad and make use of international commercial loans.
In 2015, the investment cooperation between Anhui and BRI countries was further strengthened. The province attracted US$710 million of investment from BRI countries, an increase of 13.3%, and made US$400 million of investment in BRI countries, an increase of 5.7 times. Contracts were signed for 46 new projects over US$10 million in value with partners in BRI countries, with a total contractual outward investment of US$2.97 billion, up 15% and 26.1% respectively.
2) MAJOR ENTERPRISES AND PROJECTS
At present, large and influential Anhui enterprises in the going-global campaign are Tongling Nonferrous Metals Group Holdings Co., Ltd., which is working on a copper project in Mirador, Ecuador, the project of Canadian Zinc Corporation, and a copper mine project in Rio Blanco, Peru; Anhui Yanzhuang Oil Co., Ltd., which established AY International Trade Company in Uganda and Tanzania in Africa, a joint venture with AHCO Group; Anhui Nongken Group Co., Ltd., which is pushing forward a 50-hectare integrated land agriculture development project in Zimbabwe; JAC Motors, which established JAC Motors do Brasil Automoveis S.A in Camarsal, lya, Brazil in cooperation with foreign partners; Anhui Foreign Economic Construction (Group) Co., Ltd., which is actively advancing a titanium and zirconium project in Mozambique and a cement plant project with a daily output of 3,000 tons in Sverdlovskaya Oblast, Russia; BBC A Group, which has launched a citric acid project with an annual output of 60,000 tons in Hungaiy;
Anhui Construction Engineering Group Co., Ltd., which has won the bid for the Kenya international airport project together with CATIC International Engineering Corporation; Ma Steel Group, which has newly launched a project of 60,000 forged wheels in cooperation with Naledi of South Africa.
In view of the fact that public facilities are generally weak in BRI countries and that Chinese products and technologies are needed in the process of their infrastructure construction and economic development, Anhui Conch Group, with its funds and technologies, worked to expand the export of large equipment, general contracting of projects, the export of products and labor and other related businesses overseas while investing in cement projects. At present, it has finished investment survey and planning in Indonesia, Myanmar, Cambodia, Laos and other neighboring countries in Southeast Asia. Among them, its first production line in Kalimantan Selatan, Indonesia has been put into operation, and the second is under construction. Its 5,000-ton-per-day production line project in Mandalay, Myanmar, has been commenced in cooperation with the Ministiy of Industry of Myanmar. In Laos and Cambodia, it has just signed cooperation framework agreements with partners. At present, it has projects taking shape in Indonesia, Myanmar, Cambodia, Laos, and Russia, producing 37 million tons of clinker and 50.20 million tons of cement. It has also signed a letter of intent for cooperation with Lao partners to build the China-Laos expressway.
ii) In-depth international capacity cooperation. While seizing new opportunities for international economic cooperation, Anhui will target key countries to promote the combination of international capacity cooperation with Anhui’s "adjustment, change and promotion” campaign and foster new impetus for economic growth. It will clarify the tasks as proposed under the Implementation Opinions on Promoting International Capacity and Equipment Manufacturing Cooperation in Anhui Province as soon as possible and promote the international capacity cooperation with BRI countries in the fields of building materials, automobiles and spare parts, iron and steel, chemical industry, energy, construction
Regional investment analysis report 2015 171 machinery, light industry, textiles and agriculture. It will follow up on the cooperation between JAC Motors and Volkswagen, speed up the construction of the China-Germany Industrial Park, and promote the cement projects of Anhui Conch Group in Southeast Asian countries and Russia. It will implement the coordination mechanism between Anhui Provincial People’s Government and the National Development and Reform Commission for international capacity cooperation, actively seek support in terms of policies, funds and information, and take the lead in capacity cooperation with Indonesia, Brazil, Ecuador, Romania and Hungary.
Hi) Promoting cooperation in the field of humanities. With a focus on education, culture, tourism, health, science and technology, environmental protection and other areas, Anhui will carry out multi-level and all-directional overseas cooperation and exchange. It will strengthen bilateral student exchange, introduce high-quality education and teaching resources from BRI countries, and jointly implement school projects. It will actively participate in the Silk Road Film Bridge Project and the Silk Road Book Project, and organize cultural festivals and art festivals jointly with BRI countries. It will strengthen tourism cooperation with BRI countries and encourage tourism enterprises to open up tourism markets in these countries. A long-term cooperation and exchange mechanism for medical and health care cooperation will be established for the purpose of strengthening cooperation with BRI countries in training medical and health personnel, communication on infectious diseases, and exchange of prevention and control techniques. The province will take an active part in China’s “Technology Partner Plan” so as to jointly tackle key scientific and technological problems, and promote the exchange of technical personnel. It will also make moves to boost cooperation with the BRI countries in environmental protection.
tv) Speeding up the construction of opening-up platforms. In addition to promoting the construction of international industrial cooperation parks such as the Chery Industrial Park in Brazil, the Anhui Nongken-Zimbabwe Economic and Trade Zone, and the Foreign Economic and Trade Cooperation Zone of Anhui Foreign Economic Construction (Group) Co., Ltd. in Beria, Mozambique, Anhui will actively apply for the establishment of national cooperation zones. It will speed up the construction of the Hefei and Wuhu Comprehensive Bonded Area and B-type bonded logistics centers in Bengbu (northern Anhui) and Anqing (southwestern Anhui), and build open platforms such as the Hefei Cross-Border E-Commerce Comprehensive Pilot Zone and the Wuhu National E-Commerce Demonstration City. Relying on the development of the Yangtze River Economic Belt and the cooperation mechanism for the Yangtze River Delta, Anhui will promote the establishment of an inter-departmental and cross-regional customs clearance and inspection collaboration mechanism, and integrate it into the customs clearance, inspection and quarantine system along the Yangtze River Economic Belt. Duplicable experience of the China (Shanghai) Pilot Free Trade Zone will be disseminated in Anhui in an effort to establish the Wanjiang Free Trade Zone.
v) Building the capacity for financial services. Commercial banks will be guided in financial service innovation so that they can provide financing support to overseas projects by means of international commercial loans, export credit loans, overseas investment loans and offshore financing against domestic guarantee. In addition, Anhui will encourage its financial institutions to set up branches in key BRI countries in cooperation with Anhui to improve their capacity for the disposal of overseas assets, rights and interests. It will study and establish a provincial BRI development fund, and meanwhile, help enterprises compete for the support from the Silk Road Fund, China-Africa Development Fund, China-ASEAN Investment Cooperation Fund, CIC Offshore Fund, and other funding programs. Insurance institutions will be encouraged to engage in export credit insurance and overseas investment insurance in accordance with the law so as to provide insurance coverage so that risks remain controllable for all overseas investment projects.
vi) Strengthening overseas risk prevention and control. Guided by the Implementation Plan for Overseas Safety Protection of Citizens and Institutions of Anhui Province, Anhui will establish risk prevention and control mechanisms targeted at BRI countries, and formulate emergency plans to deal with major political, economic and social emergencies in relevant countries. It will enhance security education and management of "going global” enterprises, strengthen the awareness of safeguarding national security and national interests, and uphold friendship and justice while pursuing shared interests. It will guide local enterprises to carry out project feasibility studies conscientiously to avoid project investment and operation risks. Besides, the province will strengthen contacts with Chinese embassies and consulates abroad, comprehensively use diplomatic, economic, legal and other means to properly solve and handle all kinds of problems arising in the implementation process of various outward investment projects, and practically protect the legitimate rights and interests of Anhui enterprises.
vii) Improving the sendee system. Anhui will accelerate the cultivation of enterprise-led overseas investment and transnational operation intermediaries, and build a market-oriented, and international intermediary service system for overseas cooperation with private entities playing key roles. Universities, trade associations and chambers of commerce in the province will be encouraged to cooperate with international investment promotion agencies to carry out special research on the politics, laws, markets and labor conditions in BRI countries, so as to provide going-global enterprises with legal, accounting, taxation, investment consulting, intellectual property right protection, risk assessment and authentication, and other services. It will also put great efforts into the introducing, fostering and development of translation companies and promote the market-based development of language services.
viii) Strengthening strategic interaction with the Yangtze River Economic Belt. Anhui will devote itself to promoting the development of regional linkage and jointly advancing the BRI. It will deepen the division of labor and collaboration
Regional investment analysis report 2015 173 in the Yangtze River Delta, make full use of regional cooperation platforms such as city clusters along the Yangtze River Economic Belt, and establish a sound mechanism for inter-governmental cooperation and exchange so as to jointly study and push forward the construction of major cross-regional infrastructure projects and quicken the opening of comprehensive transportation channels such as interregional railways, highways, waterways and air routes. The province will strengthen practical cooperation in the fields of customs clearance integration, cross-regional trade platforms, and industrial support and cooperation, jointly promote the going-global of local enterprises, products, technology, equipment and services, and collaboratively participate in the effort to improve infrastructure connectivity with neighboring countries and the constiuction of international economic cooperation corridors. Also, matchmaking efforts will be stepped up in industrial transfer, environmental protection, information-sharing, and social security.