Utilization of Foreign Investment in Electronic Communication Industry

During the “Tenth Five-Year” period, foreign sole capital enterprise, Sino-foreign joint-venture enterprises and Sino-foreign cooperation enterprises greatly raised their proportions in the production value of the electronic communication industry and contributed more to the industrial growth compared with domestic counterparts. The development layout of foreign capital enterprises is mainly exhibited in industrial size, enterprise strength and market share.

Utilization of Foreign Capital in Communication Equipment, Computer and Other Electronic Equipment Manufacturing in 2005
(unit: ten thousand USD)

Foreign capital enterprises expanded their size by competition effect, demonstration effect and technology transfer, which promoted the development of the country’s electronic information industry in some degree. Since China joined WTO and ITA, the electronic information product market has shifted from the sole domestic market in the past to utilize two resources and two markets to form such a new situation in which exists internationalized local market and localized international competition, that is the highly integrated home and foreign market. The domestic electronic information enterprise should quicken their pace in cultivating domestic market based on participation of international economic and technologic cooperation and competition in greater scale, broader field and higher level.

From January to September 2005, the electronic information industry utilized the foreign capital of 35.11 billion Yuan, a slight year-on-year increase of 2.2% but 41.8 percentage points lower in the growth pace compared with last year. Since the beginning this year, the sales revenue of foreign capital enterprises maintained the growth of 20% or more. From January to September, foreign enterprises realized the sales revenue of 1633.86 billion Yuan, 76.7% of the industry’s total and a year-on-year increase of 23.8%.

From Q1 to Q3, the growth speeds in communication equipment, measuring apparatus and specialized equipment for electronic industry were all above 50%, mainly ascribing to the relatively fast increase of investment in the mobile communication and terminal equipment sectors. In the mobile communication field, due to tougher and tougher competition in the mobile phone market this year, multinational companies stepped up to increase their own market shares by expanding their production capacity in China. For instance, Motorola, Samsung, Langchao and LG all had big investments in the first three quarters. Domestic mobile phone makers which were faced with more and more furious competition had to continue expanding production capacity and reconstructing. In addition, communication companies poured more into R&D of 3G with the advancement of it. The investment in transmission equipment and communication terminal equipment had relatively rapid growth, many thanks to increased sourcing by carriers and good expectation by manufacturers. The investment in computer industry grew rapidly in the first half of the year but slowed its pace in the second half of the year. From January to September, it hit an accumulated investment of 11.74 billion Yuan, a year-on-year increase of 38.1% but 67.1 percentage points lower than 105.2% in February (the fastest one). This trend was mainly attributed to the changes in investments by Taiwan-invested computer makers. In the first half of the year, Taiwan-invested computer companies greatly increased investment and expanded production capacity and the industry saw a year-on-year increase of 104.2% in accumulated investment by Hong Kong, Taiwan and Macau-invested companies. Nevertheless, the companies above slowed their investment since July, the year-on-year increase declining to 61.1%; and the year-on-year increase between January and September was 50.6%.