China's Foreign Investment Set for Record High in 2002

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Last updated at: (Beijing Time) Thursday, July 18, 2002

China's Foreign Investment Set for Record High in 2002

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The increasing amount of foreign direct investment (FDI) flowing steadily into the Chinese market is nothing less than miraculous considering that many other developing nations are witnessing a FDI outflow back to its source.

In fact, China expects foreign investment for 2002 to reach a record high of over 50 billion US dollars.

Latest statistics from the Ministry of Foreign Trade and Economic Cooperation show that 15,155 foreign-funded businesses were approved to operate in China in the first half of this year, an increase of 26.39 percent compared with the corresponding period last year.

Foreign investment entering China in the past six months amounted to 24.6 billion US dollars, up 18.69 percent on a year-on-year basis.

It is noticeable that multinational corporations are adjusting their investment structures in China by shifting their R&D centers and regional headquarters to China and making inroads into industries that used to be investment taboos before China's entry to the World Trade Organization (WTO).

Meanwhile, many multinational conglomerates that chose to promote their China interests through mergers and acquisitions are proving highly successful.

World telecommunication giant Alcatel became the holding partner of Shanghai Bell, one of China's most successful joint ventures, with narrow-majority shares. Emerson Electric of the United States bought the electrical department of local force Huawei Group while Shell signed a joint venture agreement with Sinopec.

China becoming a technology hub

China's cheap labor is no longer the only consideration of global investors, says Jun Ma, leading economist at Hong Kong DBS Securities Company. An increasing number of foreign investors are starting to notice China's huge potential for technological development.

These strategic overseas investments will help China upgrade its export mix, according to the Hong Kong economist.

While multinational corporations are introducing more manufacturing technologies into China, they have started to develop China as a hotbed of new products and technologies.

So far, foreign enterprises like Microsoft, Intel and Lucent have set up over 120 research and development centers in China. Experts say the number of China-based R&D centers for multinational corporations are likely to double within five years.

China is becoming a new world technology hub, said Fortune magazine.

Multinational corporations setting up regional headquarters

An increasing number of multinational corporations are also moving their regional headquarters to China, to coordinate their businesses in China and nearby countries and regions.

So far, Alcatel, HSBC, Citi Bank and Mckinsey have set up their regional centers in Shanghai while Motorola chose Beijing as its regional base.

China is becoming an increasingly important market for Alcatel. Establishing a regional center in China will help the company better meet the demands of local customers, says Serge Tchuruk, Alcatel Chairman and Chief Executive Officer.

The Alcatel Asia-Pacific headquarters at Pudong in Shanghai is responsible for coordinating the company's operations in 16 Asia-Pacific countries and regions as well as managing 22 China-based investment businesses and R&D centers.

A recent Fortune survey shows over 92 percent of multinational corporations will consider setting up regional headquarters in China in the future.

Huang Taiyan, a professor with the People's University of China,said the fast development of China's economy after the country's WTO accession had helped boost foreign investors' confidence in their China strategies.

Meanwhile, China's ongoing reform of highly profitable industries such as telecommunications and insurance, long avoided by foreign interests, will provide unprecedented opportunities forglobal capital.

In fact, the September 11th terrorist attack and slowdown of world economy are forcing global investors to value investment security more and carefully choose the economically safest place worldwide for their money.

"China is the best choice for global investors who value economic security," said Chinese economist Sun Jian.

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