Tesla’s US$5 billion Gigafactory helps Shanghai record increase in foreign direct investment for 2018

Shanghai, mainland China’s commercial and financial capital, shrugged off the US-China trade war to record an annual increase in foreign direct investment in 2018 – driven in no small part by Tesla’s plan to build its first plant outside the United States in the city’s free-trade zone.

Capital committed by investors that will be received in the future, or contracted foreign funds, rose by 16.8 per cent to US$46.9 billion, according to the Shanghai Municipal Statistics Bureau. The foreign funds actually received last year hit US$17.3 billion, up 1.7 per cent from 2017.

A key driver of the rebound in FDI was foreign manufacturers’ mounting interest in setting up production and research facilities in Shanghai, Tang Huihao, deputy head of the statistics bureau, said on Tuesday.

And while he did not mention Tesla’s plan to build its Gigafactory 3 at Lingang, the project is expected to cost US$5 billion, the single largest foreign investment in Shanghai’s manufacturing sector. The Palo Alto, California-based electric carmaker signed an agreement with Shanghai for the factory in July 2018, and broke ground for the manufacturing facility this month.

“Tesla’s investment is not only a numbers game that drove up Shanghai’s FDI figures, but an encouraging sign the city remains attractive to global manufacturers,” said Gao Shen, an independent analyst specialising in the manufacturing sector.

“But it will still be difficult to maintain the upwards momentum in the coming years, due to the uncertainties in the US-China economic relationship.”