Sun, Sep 26, 2004 - Page 10 News List

China top destination for investment, study shows

US LEFT BEHIND The UN's trade and development body announced that the Asia-Pacific attracted more investment than any other developing region last year

AFP , GENEVA

A worker labors on weaving machines in a textile factory in Meixian, in central China's Shaanxi Province, on Thursday. The factory, possessing 1,515 weaving machines, is one of the biggest in Meixian. China's textile industry grew 15 percent year on year in the first six months. According to the UN Conference on Trade and Development, the country's strong manufacturing industry attracted foreign investment worth US$53.5 billion last year.

PHOTO: EPA

China overtook the US as a top global destination for foreign direct investment (FDI) last year while the Asia-Pacific region attracted more investment than any other developing region, a UN report said last week.

China's strong manufacturing industry helped the country attract FDI last year worth US$53.5 billion, compared with US$52.7 billion in 2002, the UN Conference on Trade and Development (UNCTAD) said in its annual report on investment flows.

Meanwhile, foreign investment in the US, traditionally the largest recipient of such money, plunged by 53 percent last year to reach US$30 billion, the lowest level in 12 years, according to data from UNCTAD's World Investment Report 2004.

Flows to the Asia-Pacific region as a whole rebounded over the year to US$107 billion from US$94 billion in 2002 driven by strong economic growth and a better investment environment, the agency said.

China was expected to continue to attract foreign companies, analysts said.

"According to our analysis, FDI in China has not peaked although their economic growth rates have fallen," UNCTAD economist James Zhan told journalists.

The outbreak of SARS only had a marginal downward effect on investment activity as Asia emerged from the decline in foreign investment it had experienced since 2001, the report noted.

"Prospects for a further rise in foreign direct investment flows to Asia and the Pacific in 2004 are promising," UNCTAD's Deputy Secretary General, Carlos Fortin, said in a statement.

But the distribution of the new wealth was uneven across the region, with most of the money -- US$72 billion -- concentrated in north-east Asia. Flows to south-east Asia rose 27 percent to US$19 billion, while the south merely received US$6 billion in FDI.

Resource-rich central Asia recorded US$6.1 billion, and US$4.1 billion flowed into the west.

The manufacturing sector remained the dominant factor that pulled investment into China, but a rise in investment in the services industry was noted elsewhere in line with the global trend, UNCTAD said.

Services, including finance, tourism, telecommunications and information technology, formed a growing proportion of foreign direct investment stock in the region -- up to 50 percent in 2002, the most recent figure available, from 43 percent in 1995, UNCTAD said.

UNCTAD said the growing tendency to shift some business activities overseas to places where labor costs are low but the workforce is skilled helped to raise the region's profile.

Asian companies were also growing in power and reach as investors in other regions, according to the Geneva-based agency.

China and India were joining Malaysia, South Korea, Singapore and Taiwan as sources of foreign direct investment, it said.

Asian firms, such as Hutchinson Whampoa of Hong Kong, Singapore's Singtel and Samsung of South Korea, again dominate the UNCTAD list of the top companies from the developing world.

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