Sun, Jun 12, 2005 - Page 11 News List

Foreign investment in China drops as WTO frenzy abates


Foreign direct investment (FDI) in China fell 0.8 percent in the first five months of the year, the first drop in cumulative investment since September 2000, as an expansion boom fuelled by the nation's entry into the World Trade Organization cooled.

Overseas investment fell to US$22.4 billion after rising 2.2 percent in the first four months of the year, the Beijing-based Ministry of Commerce said yesterday on its Web site. Contracted foreign investment, or investment pledged but not yet used, rose 15 percent in the period from a year earlier to US$65 billion, after rising 8 percent in the first four months.

"This latest wave of foreign investment, which was mainly driven by electronics outsourcing, has peaked," said Andy Xie (謝國忠), chief economist at Morgan Stanley Asia Ltd, in Hong Kong before the figures were released. "FDI could fall this year and will need another catalyst to get it going again."

Investment by companies including Intel Corp, the world's largest chipmaker, and Quanta Computer Inc (廣達), the world's largest notebook-computer maker, has surged in the past two years as manufacturers shifted production to China to take advantage of labor costs the Asian Development Bank estimates are a third of those in Malaysia and a 20th of those in the US.

Actual foreign investment in China in the past four years amounted to US$214 billion, according to Chinese data, accounting for 38 percent of total overseas investment in the country since 1979.

"When China joined the World Trade Organization in 2001, this signaled to investors that reform in China was going in one direction," said Tim Condon, chief Asia economist for ING Bank in Singapore, before the figures were released. "Foreigners all of a sudden wanted to invest a lot of money and capital inflows into China began to surge."

Taiwan, China's fifth-largest source of investment, approved 15 percent less investment in the first four months, the Ministry of Economic Affairs data shows. Nearly a third of 848 Japanese companies surveyed by Tokyo-based market research company Teikoku Databank Ltd, said they are reconsidering plans to set up businesses in China because of rising anti-Japanese sentiment there, the research said on May 12. Japan was China's fourth-largest source of investment last year, according to Chinese data.

Exports by foreign companies have been adding to China's soaring trade surplus, which rose to US$8.99 billion in May, its third-largest on record, the customs bureau said June 10. Exports of high technology products in the first five months of the year from companies including Quanta Computer and Motorola Corp rose 33 percent to US$76 billion.

Hon Hai Precision Industry Co (鴻海), Taiwan's biggest electronics company by sales, Quanta Computer and Motorola, the world's second-biggest handset maker, were China's top three exporters last year in terms of value, according to commerce ministry data.

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