China attracted record foreign direct investment last year as companies shifted production to the world's most populous country to take advantage of a growing domestic market and cheap labor.
Foreign investment in factories, supermarket chains and apartment buildings rose 13 percent to US$52.7 billion in 2002, the Ministry of Foreign Trade and Economic Cooperation said.
Contracted foreign investment, a sign of future investment flows, rose 20 percent to US$82.8 billion.
The government made it easier for companies such as Nissan Motor Corp and Samsung Electronics to expand their businesses to help provide jobs for some of the 27 million workers fired from state-run factories since 1998. Promotions for many government officials are now tied to their ability to attract foreign investment.
"We've seen a significant shift in government attitudes toward foreign investors," said Xie Xin, an economist with Bank of America in Singapore. "Investors get the feeling that local officials would bring them water to wash their feet if they asked." China surpassed the US last year to become the top recipient of foreign direct investment, according to a UN report. Companies can take advantage of low factory wages, which average less than one-twentieth of those in the US, to manufacture for export as well as for sale to the country's growing middle class in cities such as Shanghai and Beijing.
Rising foreign investment is helping China grow at the fastest pace among the world's top 10 economies. Last year, the country's growth accelerated to 8 percent from 7.3 percent in 2001.
Foreign automakers are boosting China production, trying to keep pace with a car market where sales expanded by 63 percent in the first 11 months of last year to 1.1 million units, according to Automotive Resources Asia, an industry consultant.
* Foreign companies invested US$52.7bn.
* Contracts worth US$82.8bn were inked.
* Regulation of foreign investors was eased, encouraging companies like Nissan and Samsung to expand Chinese enterprises.
* Samsung invested US$70 million in China last year and intends to add to this figure this year.
* Factory worker salaries averaged one-twelfth of those in the US.
* WTO entry in December 2001 was a major factor in making the country a more tolerable environment for investors.
Nissan Motor Co, Japan's third-largest automaker, announced plans in September to pay 8.55 billion yuan (US$1.03 billion) for half of an auto venture created from the main assets of Dongfeng Motor Corp, China's second-largest vehicle maker.
Makers of computers, mobile phones and display screens also boost China investments to take advantage of rising domestic sales and for export to the rest of the world.
Samsung Electronics Co, Korea's biggest electronics maker, is building a liquid crystal display (LCD) plant in Suzhou, Jiangsu province. The plant is expected to produce 200,000 units a month when it begins operation in the third quarter of this year.
Samsung invested US$70 million in China last year and will spend more this year, said James Chung, a company spokesman in Seoul.
Local officials are making it easier for foreign companies to set up shop.
Take Gong Bengao, a manager at Weihai Municipal Foreign Investment Promotion Center in eastern China's Shandong province.
He traveled to South Korea three times, Hong Kong twice and Taiwan once last year to encourage prospective investors to consider setting up factories in his home town. He and his colleagues assist investors in finding suitable land for projects and provide free consultancy services.
Gong said he targets Korean investors, which are attracted by "China's market, lower labor costs in Weihai and convenient transportation from Korea to Weihai."
China's entry into the World Trade Organization in December, 2001 also helped attract more foreign companies, as China began to open up the banking, retail and insurance industries to greater foreign competition.
RSS