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China still most attractive for foreign investment

By Liang Jie (People's Daily Overseas Edition)

16:27, May 29, 2012

Edited and translated by People's Daily Online

According to foreign media report, U.S. manufacturers in China are returning to their homeland at a faster pace, and Japanese manufacturers are also fleeing China. Certain institutions thus concluded that there was a phenomenon of foreign manufacturers fleeing China. However, experts consider the conclusion to be a generalized exaggeration. There is no sign of foreign companies leaving China on a large scale, the Chinese Ministry of Commerce said.

Common to see foreign investors come and go

“It is common to see foreign investors or companies come and go. International capital flows always seek interests. Certain foreign companies’ withdrawal of their investment does not mean China is less attractive for foreign investors,” said Bai Ming, deputy director of the Department of International Market Research at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.

Bai said that with the global financial crisis still casting a shadow over global development, the advanced services sector in the United States is obviously much less useful than the manufacturing sector in promoting economic prosperity and social stability. That is why the country has introduced a number of polices for attracting back their manufacturers, and launched the Select USA initiative and other programs to revitalize manufacturing.

However, certain foreign investors have chosen to leave China due to other reasons, including rising labor, logistics, raw materials, and financing costs as well as increasing energy, land, and ecological constraints.

“U.S. and Japanese manufacturers are withdrawing mainly because of economic factors. Foreign capital will continue to flow into China if the three driving forces of foreign capital inflows, namely labor cost advantage, huge market, and high rates of return on investment, have not fundamentally changed over the past two or three decades. It is normal for the United States and Japan, which seek to revitalize their manufacturing sectors, to withdraw certain automated manufacturing industries or high-end industrial chain links from China to reduce costs and improve cost structures. This is in line with the general pattern of capital flows,” said Zhang Lining, a researcher at Tsinghua University’s Center for China in the World Economy.

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