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Table of Contents:

(III) West China

Guangxi

  • (1) Utilization of foreign capital in Guangxi in 2015
  • 1) UTILIZATION OF FOREIGN CAPITAL
  • i) Scale of foreign capital utilization. In 2015, a total of 142 foreign investment projects were approved in Guangxi, up 2.9% year-on-year. The contractual foreign investment amounted to USS3.357 billion, an increase of 75% year-on-year; the actual utilization of foreign investment was US$1,722 billion, up 72% year-on-year, a record high. Specifically, BRI countries invested in 25 projects in Guangxi, with a contractual investment of US$711 million and of US$500 million actually used, mainly from Malaysia and Singapore. Among them, 13 projects were invested in by enterprises from Malaysia, with a contractual investment of US$2.16 million and an actual utilization of US$39.86 million. Eight projects were invested in by enterprises from Singapore with a contractual investment of USS668 million and an actual utilization amount of US$449 million. The investment mainly went to transportation, warehousing and postal services, manufacturing, and wholesale and retail sales.

ii) Characteristics of foreign capital utilization. First, main foreign investment sources remained the same. In 2015, there were 26 countries and regions

(including free islands) investing in Guangxi. The Hong Kong SAR remained the top source, with an actual investment of USS544 million, accounting for 31.60% of the total. ASEAN's investment in Guangxi picked up, with the actual investment up more than 10 times to US$499 million, representing 29.02% of the total, securing the second place among all source countries and regions. ASEAN's investment in Guangxi was mainly from Singapore, who made an actual investment of USS449 million. Investment from the EU increased slightly, with an actual investment of US$238 million, making up 13.82% of the total, of which Sweden, in particular, contributed an actual investment of US$188 million.

Second, the industries receiving foreign investment remained unchanged generally. Foreign investment concentrated in the secondary industry, and the manufacturing industry was still the most attractive. The actual foreign investment reached US$567 million in the year, accounting for 32.94% of the total. Thanks to the rapid development of foreign investment in M&A, transportation, warehousing and postal services, the actually used foreign investment was US$451 million, making up 26.21%. The real estate industry actually utilized US$362 million of foreign investment, accounting for 21.03% of the total. Agriculture, forestry, animal husbandry and fishery, and water, environment and public facilities management utilized 5.82% and 3.48% of the total foreign investment in Guangxi respectively. At the same time, foreign investment gradually shifted its focus to services, high-tech, emerging industries and modern agriculture. The utilization of foreign investment in the service sector continued to grow, with three financial leasing companies, one air transport service company and four tourism management sendee companies approved; the real estate industry saw a slowdown, with the actually used investment falling from 40.62% of the total in 2014 to 21.03% in 2015, down by nearly 20 percentage points.

Third, the number of major foreign investment projects increased. The investment in major projects picked up to a certain degree, and new large-scale projects have increased significantly. During the year, there were nine large projects utilizing over US$50 million of foreign investment (including four projects with over US$100 million of investment), totaling US$1.18 billion and accounting for 68.52% of the total amount utilized in Guangxi. The establishment of Guangxi Shengran Eco-agriculture Co., Ltd. and Guangxi Beibu Gulf-PSA International Container Terminal Co., Ltd. with a total investment of approximately US$300 million, and the foreign capital acquisition of Guangxi Jinchuan Nonferrous Metals Co., Ltd. (US$147 million), Guangxi Guilin-Xing'an Expressway and two other transportation infrastructure construction projects (about US$450 million) were the highlights.

Fourth, the models of foreign capital utilization showed a diversifying trend. In addition to the establishment of foreign-owned enterprises, joint ventures and other traditional models of investment, foreign M&A of domestic enterprises became an important new way for the autonomous region to use foreign capital. For example, several major projects including the foreign capital M&A of three

Regional investment analysis report 2015 189 major transportation infrastructure projects such as the Guilin-Xing’an Expressway, Guangxi Jinchuan Nonferrous Metals Co., Ltd., Guangxi Guangxing Automobile Sales and Service Co., Ltd. and Guangxi Vector Biotech Co., Ltd. diversified Guangxi’s foreign capital utilization models. Progress was also made in the listing and financing of foreign-invested enterprises. Guangxi Lucheng Water Co., Ltd. was successfully listed on the Shanghai Stock Exchange, the first listed company in the water production and supply industiy of Guangxi.

Fifth, all cities made great progress in utilizing foreign capital. The Beibu Gulf Economic Zone still maintained a strong development trend with the actual utilization of foreign investment amounting to US$956 million, or 55.51% of the total. From the perspective of growth rate. 11 out of the 14 cities in Guangxi achieved a year-on-year increase in paid-in foreign investment. Among them Guilin, Laibin, Baise, Qinzhou and Wuzhou saw significant increases. From the perspective of absolute value, Guilin ranked first with USS653 million, accounting for 37.89% of the total; Qinzhou ranked second with US$324 million, making up 18.81% of the total; and Nanning ranked third with US$310 million, representing 18.00%.

2) PROBLEMS IN UTILIZATION OF FOREIGN CAPITAL

There are still many uncertainties in the global economic development, and the competition for foreign direct investment in the world tends to be fiercer. Some transnational corporations become less confident in investment in China. There is room for further improvement in China’s investment environment. The downward pressure on the domestic economy still exists, plus a continuous rise in business costs for land, water, electricity, raw materials, logistics and labor, increasing operating pressure of foreign-invested enterprises. In the future, China will enter a new normal stage of steady and slow development in terms of foreign investment. The increasingly fierce competition among provinces and cities for foreign capital resources and the weakening preferential policies for foreign capital have posed a challenge to investment promotion in Guangxi. Guangxi’s investment environment needs to be further improved, and the management systems for utilizing foreign capital need to be bettered. For a long time, Guangxi has maintained a small amount of foreign investment stock and launched few large projects. The industrial layout of transnational corporations in China has been basically set, making it more and more difficult to attract foreign investment and to achieve material growth in the utilization of foreign investment.

3) WORK PLAN FOR 2016

In 2016, Guangxi will remain committed to attracting investment and strengthening trade, and strengthen policy guidance, enhance service efficiency, give prominence to investment promotion, and build a platform for attracting foreign investment into industrial parks in the principle of “active action, reform and innovation, targeted efforts, all-round” policy implementation and drive for progresson all fronts. It will speed up the cultivation of competitive advantages and new growth drivers for utilizing foreign investment and seek breakthroughs in terms of the amount and quality of foreign investment utilized in the autonomous region through the transformation of government functions, the transformation in the models of foreign investment utilization, and improvement in the investment environment and the structure of foreign investment.

First, Guangxi will deepen the reform of its foreign investment management system. Guangxi will simplify and improve the approval procedures for foreign investment, shorten the time required for approval, and effectively improve administrative efficiency. It will explore reform of the foreign investment management system, and actively probe the negative list management model.

Second, it will innovate in the use of foreign investment and highlight industry chain investment. Guangxi will innovate in financing modes and encourage foreign investors to set up investment companies, equity investment funds, venture capital funds, etc. By combining investment, technology and intelligence attraction, it will vigorously develop the headquarters economy, attract multinational companies to establish regional headquarters, R&D centers and functional facilities, and foster new economic growth points. It will study the approach of attracting foreign investment upstream and downstream industry chains.

Third, it will coordinate domestic and overseas markets to broaden channels for attracting foreign investment. Guangxi will unswervingly promote going-global and bringing-in simultaneously, and roll out investment promotion activities energetically. It will go to Beijing, Shanghai, Guangzhou and other places where foreign enterprises concentrate to bring in foreign investment. It will also go to ASEAN, the Hong Kong SAR, the Macao SAR and Taiwan, China, to stage matchmaking campaigns and themed investment promotion events. It will expand and deepen investment cooperation with developed countries in Europe and America such as Germany, the United Kingdom, France and the United States. Aiming to attract large and strong investors, it will continue to invite Fortune Global 500 companies to take tours in Guangxi and strive to make breakthroughs in utilizing foreign investment in key areas.

Fourth, Guangxi will further optimize the investment structure. Guangxi will step up its efforts to develop new competitive advantages in the utilization of foreign investment, combine investment attraction with Guangxi’s advantages and featured industries, encourage and channel foreign investment to industries such as modern services and strategic emerging industries, and constantly improve the industrial structure of foreign investment. It will actively introduce foreign-invested enterprises in high-tech industries, processing and trade and encourage foreign investment in its high-end manufacturing, modern services and strategic emerging industries. It will focus on the introduction of leading enterprises and multinational enterprises engaged in trade and commerce, retail sales, logistics, e-commerce, the Internet of Things and finance in the service sector.

Fifth, Guangxi will make efforts to create a good investment environment. Guangxi will ensure that projects are well tracked and served, actively assist

Regional investment analysis report 2015 191 enterprises in solving the problems and difficulties encountered in production and operation through sound coordination efforts, and create a fair and orderly market environment. While tackling problems in big projects, it will track and serve major investment projects, do a good job in the coordination and seivice delivery for enterprises, and attract big leading projects to settle in Guangxi. With these, there will likely be more projects adding to their existing capital and making more investment. In addition, Guangxi will strengthen guidance for national development zones, strive to build a new platform for pooling foreign investment and prompt a rise in both the quality and quantity of foreign investment utilization.

  • (2) Overseas investment of Guangxi in 2015
  • 1) SCALE AND CHARACTERISTICS
  • i) Outward investment, hr 2015, Guangxi enterprises estabhshed 72 overseas investment enterprises (including capital increment projects and overseas institutions, the same below), with a total contractual investment of US$1,607 billion, including of US$1,366 billion from the Chinese side; the paid-in investment stood at US$595 million, a year-on-year increase of 105.50%. The investment was mainly made in such industries as services, infrastructure, manufacturing, agriculture and mining.

ii) Overseas project contracting. In 2015, new projects contracted overseas amounted to a total value of US$656 million, achieved a turnover of US$940 million, and the number of workers hired at the end of the project period was 3,656. Overseas contracted projects mainly involved housing construction, public utilities works, power installation, industrial manufacturing, and communications.

Hi) Main characteristics. First, new breakthroughs were made in enterprises going global by establishing bases and industrial parks overseas. SAIC-GM Wuling established a manufacturing base in Indonesia; Beihai Beingmate Nutritious Food Co., Ltd. set up a processing plant in Australia; Taiwan-funded enterprises invested an electronic industrial park in Cambodia via Beihai; Fenglin Group built a wood processing industrial park in New Zealand; and China-Cambodia Agriculture Promotion Center and KopSrov Agriculture Development Center were officially started. Compared with the previous years, Guangxi’s outward investment has shown an obvious trend in establishing bases and industrial parks since 2015.

Second, new breakthroughs were made in developing new markets. LiuGong Machinery Co., Ltd. explored the South American market, and the contractual Chinese investment was US$3.95 million. Other enterprises’ investment in Africa and Oceania increased substantially. Specifically, Chinese investment from Guangxi in Oceania increased by more than 80 times year-on-year to USS82.1 million; the contractual Chinese investment in Africa reached USS80.12 million, up more than 40 times from the previous year, which helped Guangxi’s manufacturing and mining industries go global.

Third, in terms of overseas projects, Guangxi International Construction Engineering Co., Ltd. signed contracts on FERRAK Bioenergy Sugar Factory and Winery Project in the Dominican Republic of Latin America, with a contractual investment of US$219 million. It is the first time that Guangxi enterprises have undertaken projects in this country.

Fourth, new breakthroughs were made in private enterprises’ going-global efforts. In 2015, the confidence of private enterprises in going-global increased greatly. More than 60% of the 60 Guangxi enterprises investing abroad were private enterprises and the contractual investment involved was US$1,101 billion, twice the figure of the previous year and accounting for 89% of the total. This helped break the long-term dominance of state-owned enterprises in this regard.

Fifth, new breakthroughs were also made in the growth of exports under projects. In 2015, under the influence of a significant growth in new overseas project contracts, the exports under the projects of Guangxi increased by 85% on a year-on-year basis to US$56.63 million, which contributed to the new development of overseas contracted projects.

Sixth, a comprehensive information sendee platform for overseas investment cooperation was preliminarily put in place. In cooperation with Bank of China, a special training course on letter of guarantee was launched, and the construction of an overseas risk platform has been promoted with China Export & Credit Insurance Corporation.

2) PROBLEMS

The ability to go global is still low. In general, the capital strength of Guangxi foreign trade enterprises is not strong and their investment ability is insufficient. No cluster effect has developed as most enterprises operate single-handedly. Although there has been a significant increase in approved outbound investment cooperation projects since 2015 compared with 2014, the average contractual investment of each project was only about US$25 million, showing a small investment scale.

Overseas investment and cooperation concentrated highly, increasing the risk. Guangxi’s overseas investment markets are mainly the ASEAN, and the market of overseas contracted projects is mainly Angola. The economies of scale have not been formed yet. As a result of the changing international situation, some ASEAN and African countries are suffering from constant wars or rising threats for wars; some are facing increasing political risks such as political riots, expropriation, currency exchange restrictions and government default; project owners in some countries are at higher commercial risks of breach of contract and bankruptcy, which have led to significant risk exposure in overseas assets and some projects.

It is difficult for overseas investment and cooperation enterprises to secure financing. With the further implementation of the BRI and the going-global strategy, despite the increasing demand for overseas investment and

Regional investment analysis report 2015 193 cooperation, how to put into action the financial support policies of the central government and the government of the autonomous region remains a key issue. Going-global enterprises are still facing many difficulties in financing at home and have no financing channels abroad, which affects their ability to go global.

It is difficult to recover funds from overseas contracted projects. Due to the influence of foreign exchange control and project progress, it is difficult to recover the funds from some overseas contracted projects, which affects the overall performance of some international project contractors.

3) WORK PLAN FOR 2016

Guangxi will earnestly and fully put into action the guiding principles of the 18th CPC National Congress and the third, fourth and fifth plenary sessions of the 18th CPC Central Committee on going-global, and effectively implement the central government’s policies on supporting the equipment manufacturing industry to go global and increasing financial support for going-global. Guangxi will actively participate in the BRI and the upgrading of the China-ASEAN Free Trade Zone, constantly improve the OFDI promotion system, increase financial support for the establishment of bases and industrial parks overseas, and pay more attention to the quality of outward investment. It will expand the overseas project market, promote international cooperation in agriculture and manufacturing, put more effort in the construction of overseas industrial parks, and continue making positive contributions to the Malaysia-China Kuantan Industrial Park, the China-Indonesia Economic and Trade Cooperation Zone, the SAIC-GM Wuling Indonesia Manufacturing Base, the China-Cambodia Agriculture Promotion Center and other major overseas projects. Additionally, it will strengthen overseas production safety management, ensure the safety of overseas assets, and enhance the capacity and potential to deal with the TPP.

First, Guangxi will promote the introduction of policies and measures to support enterprises in going-global to establish bases and parks, and guide enterprises to expand the scale and quality of outward investment. Learning from Ningbo's experience and measures in supporting the construction of “three major bases” including overseas production and manufacturing base, trade and marketing base or resource development base, Guangxi will bring forth new ways of overseas investment and cooperation, and will promote the issuance of special policies such as the Administrative Measures for Overseas Parks and Bases at Guangxi Autonomous Region Level, the Policy of Guangxi Zhuang Autonomous Region on Supporting the Construction of Overseas Parks and Bases to support enterprises to go global in groups and exert the effect of agglomeration. Taking advantage of the opportunities of the state’s supporting equipment manufacturing industry in going-global and providing greater financial support to going-global, Guangxi will actively direct well-positioned enterprises to strengthen overseas market investigation and expand the scale of going-global efforts. It will support and encourage powerful enterprises to expand overseas markets, focus on developing project contracting markets in

Africa, ASEAN, Latin America, etc., and undertake more projects in connection with interconnection, housing, municipal works and oil pipelines. It will enhance cooperation in agriculture and mineral resources with resource-rich regions such as ASEAN and Africa, support qualified manufacturing enterprises and agricultural enterprises in establishing production bases abroad, improve the project’s ability to promote exports, and attach importance to the income and quality of enterprises in outward investment.

Second, Guangxi will make new progress in its major projects in the ASEAN, and conduct in-depth exploration of the ASEAN market. To this end, it will encourage the Malaysia-China Kuantan Industrial Park, iron and steel project in Kuantan Industrial Park and Kuantan Port, and provide more convenient sendees for enterprises in terms of certificate application, financing, investment promotion and publicity. Efforts will be made to promote investment in the China-Indonesia Economic and Trade Cooperation Zone, and assist the Cooperation Zone with the confirmation and assessment by the Ministry of Commerce. Guangxi will step up the construction of the SAIC-GM Willing Manufacturing Base in Indonesia and the “One Region Multi-Park” of the China-Cambodia Agriculture Promotion Center. It will strengthen overall planning, broaden channels for cooperation, urge enterprises to strengthen connection with parks, and attract enterprises to enter the park to build factories. It will build a China-ASEAN Cooperation Park brand and drive relevant industrial enterprises to carry out investment cooperation in relevant countries.

Third, Guangxi will provide better financing services for enterprises going-global under the BRI. It will strengthen the research on problems in financing for enterprises going-global under the BRI, and promote the establishment of a unified service platform and project base for Guangxi’s using such channels as the Asian Infrastructure Investment Bank, New Development Bank BRICS, Silk Road Fund and China-ASEAN Investment Cooperation Fund to go global, thus providing professional assistance for enterprises in the aspects of financing consultation, information service, financing project utilization and financing business handling. Guangxi will encourage cooperation between government, banks and enterprises, and make efforts to solve the financing difficulties encountered by going-global enterprises. It will strengthen contacts with the Export-Import Bank of China, China Development Bank, Industrial and Commercial Bank of China, HSBC, China Export & Credit Insurance Corporation and other financial and insurance institutions to further smooth the channels for cooperation between banks and enterprises. It will provide support for enterprises in obtaining loan support through domestic and overseas financial and insurance institutions and reduce the financing cost.

Fourth, the building of a comprehensive service platform for overseas risk prevention will be enhanced. Guangxi will encourage enterprises to participate in overseas project insurance, strengthen risk prevention and control, and act deeply upon its overseas asset risk prevention plan. It will solicit greater financial support from its government finance, and strengthen the construction and policy research on a comprehensive service platform for overseas asset risk

Regional investment analysis report 2015 195 prevention. It will further intensify the overseas risk education of enterprises, support the cooperation of overseas investment and project contracting enterprises with China Export & Credit Insurance Corporation, insure overseas projects, and guard against the risks of overseas projects. It will increase insurance support for expatriate workers under overseas investment, and require full insurance coverage of all expatriate workers.

Fifth, active actions will be taken to explore the international project contracting market. Guangxi will actively mobilize enterprises to participate in interconnection infrastructure development under the BRI, and continue to encourage their participation in the construction of the road interconnection project and pan-Beibu Gulf offshore channel between Guangxi and Vietnam. Enterprises will be backed up to continue exploration in development of the project contracting market in Africa, ASEAN, Latin America and other countries, and to contract more projects in housing, municipal works, and oil pipelines.

Sixth, the impact of TPP on outward investment and cooperation of Guangxi will be analyzed. An in-depth analysis will be conducted over the impact of TPP on overseas investment cooperation in Guangxi in the future, especially the possible changes in investment cooperation with Vietnam and the countermeasures to be taken.

 
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