News analysis: FDI in China Keeps Growing

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Last updated at: (Beijing Time) Saturday, July 20, 2002

News analysis: FDI in China Keeps Growing

In the first six months of 2002, actual foreign direct investment (FDI) in China rocketed to 24.58 billion U.S. dollars, setting a record growth rate of 18.69 percent year-on-year.

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In the first six months of 2002, actual foreign direct investment (FDI) in China rocketed to 24.58 billion U.S. dollars, setting a record growth rate of 18.69 percent year-on-year.

Meanwhile, as the contract value of FDI saw a rapid growth, actual investment is expected to continue to soar in coming months.

According to the latest statistics released by the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), the contract value of FDI in the first half-year grew 31.47 percent to 43.99 billion U.S. dollars, with 15,155 new foreign-funded projects approved.

Local analysts attributed the rigorous growth of FDI to three factors as well as social stability and improving infrastructures in China. The three factors are China's entry into the World TradeOrganization (WTO), the steady growth of the Chinese economy and the strategic readjustment of multi-national companies.

In 2000, FDI in China grew only one percent, compared with an all-time high of 15.7 percent in actual investment in 2001. ActualFDI in 2001 totaled 46.9 billion U.S. dollars.

Though many experts predicted a slowdown of FDI growth in 2002 following the 2001 peak, the real growth this year exceeded all expectations.

Jin Bosheng, an expert from the Institute of Foreign Trade and Economic Cooperation, said investor confidence played a major rolein the rise of FDI in China.

He said the country's entry into the WTO greatly enhanced overseas investor confidence in the improvement of the investment and legal environment.

Rapid economic growth also made China attractive to overseas investment.

During the Asian financial crisis, as many hard-hit regions sawslumps in FDI, China maintained a sustained and rapid growth of the economy. China's gross domestic product (GDP) rose 7.3 percentlast year and is expected to grow more than seven percent this year.

Official figures showed the actual growth of GDP was 7.8 percent in the first half of this year. Jin predicts the GDP will grow 7.5 percent for the whole year.

The above factors have prompted multi-national companies to make China their first choice for investing as they readjust global strategies.

China is increasingly recognized by multi-nationals as a vital part of their global strategy, a product base and a manufacturing center.

In terms of actual investment, the number of newly approved solely foreign-funded enterprises was double that of joint ventures in the first half of 2002. A major proportion of solely foreign-funded enterprises are owned by multi-national companies.

Growing FDI has helped expand China's imports and exports. Foreign-funded enterprises have become the largest generator of imports and exports of China since last year, accounting for more than half of the country's total import and export volume.

During the first five months of this year, exports by foreign-funded companies grew 3.7 percent, faster than the growth of totalexport volume of China. For the first time in history, exports by enterprises with foreign investment made up more than half of the country's total.

Chinese Premier Zhu Rongji said last year China would shift thefocus of utilizing FDI to introducing technology, management expertise and talent in the future. He said China would step up the introduction of high technology and expand joint ventures in the service sector.

The first half of 2002 saw an accelerating influx of investmentby multi-national companies with advanced technology, management expertise and talent. In the past six months, China promulgated new regulations on encouraging overseas investment in the field ofnew and high technology.

At the same time, foreign investment in tourism, communications,education, consultation and legal services showed an increasing momentum.

Jin Bosheng predicts FDI in China will keep increasing in the latter half of the year though the increase rate may drop. He saysthe actual FDI will grow at a double-digit rate to over 50 billionU.S. dollars for the whole year.

Source: Xinhua News Agency

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