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FDI rise possible

(China Daily)

08:16, September 06, 2012

The slower rate of increase in inbound foreign direct investment into China has led to fears that the country is no longer attractive to global capital and that the deceleration marks the start of an entrenched trend.

If the gloomy prospects for the global economy are taken into consideration, though, it is highly likely that this downturn in FDI only reflects world conditions and does not result from changes in China's economic fundamentals.

Admittedly, China is faced with greater competition in its attempts to attract global capital, that being the result of increasing production costs and the policies that other countries, such as the US and Republic of Korea, have adopted to woo capital.

China's labor, land and financing costs have steadily risen in recent years, helping to explain why some investors are putting their money into countries with lower production costs. Even some domestic manufacturers have decided to move their operations to countries such as Vietnam.

But it is too early to conclude that such a shift will lead to enough industrial emigration to paralyze the Chinese manufacturing industry. China still enjoys a number of advantages that make it attractive to global investors.

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