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Tue, Jul 15, 2003 - Page 12 News List

SARS hindered investment in China

SCARED OVER Corporate chiefs have begun to return now the epidemic has ended

BLOOMBERG

China last month attracted foreign investment at the slowest pace this year as the SARS virus kept visitors away. Overseas investors are returning now that the nation has stopped the disease from spreading, economists said.

Foreign direct investment rose 2.5 percent from a year earlier to US$7 billion, the Ministry of Commerce said on its Web site in Bei-jing. In the first half, foreign investment rose 34 percent to US$30.3 billion.

"SARS had an impact on this June figure," said Tai Hui, an economist with Standard Chartered in Hong Kong.

"Foreign investors' sentiment toward China is still very positive," Tai said.

SARS prompted overseas executives such as Boeing Co chief executive Officer Phil Condit and Siemens AG chairman Heinrich von Pierer to postpone visiting China in recent months, hampering negotiations about planned investments.

Condit, who visited Beijing for 48 hours last week, told Chinese reporters that Boeing, the world's No. 1 planemaker, will set up a US$100 million airplane repair, modification and maintenance venture in Shanghai, said Mark Hooper, a spokesman for Boeing in Hong Kong.

He also said Boeing may build parts for its proposed 7E7 Dreamliner plane in China.

"We are making some investments and we talked about this joint venture we're going to do with Shanghai Airlines Co Ltd and the airport people," Hooper said.

Von Pierer also visited the Chinese capital last week and was cited by Xinhua News Agency as saying the world's biggest engineering company will spend 100 million euros (US$113 million) on a new office building in the city.

While SARS disrupted foreign investment in the second quarter, the disease's impact appears to have been short-lived.

Contracted foreign investment, an indicator of future investment, rose 35 percent to US$12.7 billion last month and surged two-fifths to US$50.9 billion in the first half.

China last year surpassed the US as the top recipient of foreign direct investment, which is a key driver of growth in the world's sixth-largest economy.

Foreign investment accounts for 5 percent of China's GDP and the factories built by overseas companies produce about half of the nation's exported goods. Overseas sales make up about a third of China's economy.

Hui said he expect China to attract record foreign investment this year as companies such as LG Electronics Inc and SABMiller Plc pour money into the country.

LG, South Korea's second-largest electronics maker, said it plans to invest US$500 million over the next three years to expand its production facilities in China. The company has so far invested US$2 billion in China, setting up 17 factories making cellphones, refrigerators and washing machines.

SABMiller, the world's second-largest brewer, bought a 30 percent stake in Harbin Brewery Group Ltd for HK$675 million (US$87 million) last month to reinforce its dominance as the largest foreign brewer in China. The company, formerly known as South African Breweries Plc, now has 31 breweries in China.

The World Health Organization on June 24 lifted its travel advisory against Beijing, the last area in China it recommended travelers avoid. The UN body has since declared the disease contained worldwide.

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