China ranks first in foreign investment but small businesses suffer
China received US$ 163 billion dollars of foreign direct investments last year compared to US$ 134 billion for the US; however, China's investments in the Belt and Road are down. For Prime Minister Li Keqiang, the country faces great challenges. Vice Prime Minister Liu He pledges help to small businesses impacted by COVID-19.
Beijing (AsiaNews) – China has overtaken the United States in terms of foreign direct investment (FDI).
According to a report published yesterday by the United Nations Conference on Trade and Development (UNCTAD), China was the largest recipient of FDI in 2020 with US$ 163 billion compared to US$ 134 billion for the US.
As a result of the pandemic, foreign direct investment fell by 42 per cent globally, from US$ 1.5 trillion dollars in 2019 to US$ 859 billion in 2020.
In China however, inflows increased by US$ 23 billion, whilst FDIs into the United States fell by US$ 117 billion.
With 2.3 per cent GDP growth last year, China was the only major economy to experience expansion.
Among the advanced countries, only Taiwan did better (around +2.5 per cent). For 2021, analysts expect China's GDP to grow by more than 6 per cent.
The large influx of investments is a sign that investors believe in China’s economy, and in the government's ability to overcome the pandemic emergency.
The figure marks also the failure of former US President Donald Trump, who had bet on the pandemic bringing US companies back from China.
Yet, according to several observers, China’s post-COVID recovery remains tricky. The collapse of investments into the Belt and Road Initiative, the great project promoted by Chinese President Xi Jinping to control world trade, is a sign of that.
The China Global Investment Tracker calculated that last year Chinese investments in this area stopped at US$ 46.5 billion, down from US$ 103 billion in 2019, and US$ 117 billion in 2018.
Meanwhile, Chinese leaders have expressed concern about the resilience of the country’s economy.
Speaking to the State Council on 20 January, Prime Minister Li Keqiang said the country is facing great challenges and uncertainties.
The biggest problem is small and medium-sized enterprises (SMEs), which employ 80 per cent of private sector workers.
Last week, Vie Prime Minister Liu He said SMEs are in trouble due to insufficient demand and the rising cost of labour and raw materials.
The government must defuse this potential social bomb. There are 20 million SMEs in China, plus 90 million self-employed workers.
To cope with their crisis, Liu announced a new aid package. Support should come from local governments and financial institutions, which are known however to favour large state-owned enterprises.
This is the issue raised by Jack Ma, founder of e-commerce and IT giant Alibaba, who has come under fire from the authorities for his growing influence.
Alibaba is the majority shareholder of Ant Group, a hi-tech company that also provides online micro-credit services.
According to Ma, platforms like Ant are the only real tool available to SMEs to obtain loans.