China booming as foreign direct investment soars

Foreign direct investment into China rose more than a quarter in the first seven months of this year, helping drive growth in the world's sixth-largest economy.

Foreign direct investment rose 27 percent from a year earlier to US$33.4 billion, the Ministry of Commerce said on its Web site in Beijing. Contracted foreign investment, a sign of future investment, increased about a third to US$59.2 billion.

The ministry did not give a breakdown for last month.

Companies such as Bridgestone Corp and Infineon Technologies AG are expanding in China to take advantage of the nation's cheap labor and rising spending power. Digital-camera maker Pentax Corp may follow suit.

"We're thinking of setting up a subsidiary in China by the end of this year," Pentax president Fumio Urano said in an interview in Tokyo last Friday.

"Labor's cheap but most of all, demand is growing rapidly," he said.

Pentax currently makes all its digital cameras at a factory in the Philippines. The plant has a production capacity of 200,000 units a month.

Rising foreign direct investment is creating jobs for some of the 8 million people entering the workforce each year and helping the economy grow at the fastest pace in North Asia. It accounts for about 5 percent of GDP and the factories built with these funds produce half China's exports.

China last year attracted a record US$52.7 billion of foreign investment, overtaking the US to become the top recipient of such funds. Even after the SARS epidemic kept US, European and Japanese investors away in the second quarter, this year looks set to be another bumper year.

"Definitely, it will be close to last year's level or more than that," said ING Bank NV economist Prakash Sakpal. Foreign "investors are optimistic and their confidence is still strong."

Bridgestone Corp, which overtook Michelin & Cie as the world's biggest tiremaker last year, said in February it will open a new US$99 million factory in Jiangsu Province next year. The company already has two tire plants in China, in Shenyang and Tianjin.

Infineon Technologies AG, Europe's second-largest semiconductor maker, on July 28 said it set up a venture with China-Singapore Suzhou Industrial Park Venture Co to build a computer-chip plant near Shanghai. The venture, which is 73 percent owned by Infineon, will invest about US$1 billion over the next 10 years, it said.

In the first half of this year, foreign direct investment into China surged 34 percent to US$30.3 billion. The nation's exports rose about a third to US$190 billion and its GDP grew 8.2 percent, the fastest pace in North Asia.