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China still top destination for FDI

By Ding Qingfen (China Daily)
Updated: 2009-06-09 08:06

Workers prepare food at Beijing Aviation Food Co, the first FDI joint venture established after the reform and opening policy. [CFP]

Though the financial crisis is slowing growth in foreign direct investment (FDI) this year, China still remains an attractive destination for foreign investors due to its dynamic economy, according to a statement on the Ministry of Commerce (MOFCOM) website.

The Chinese government is taking steps to stabilize the FDI and also improve its quality, it said.

Hurt by the global financial crisis since last October, FDI into China began to decrease from a year earlier, and fell 2.02, 36.52 and 5.73 percent respectively during the last three months of 2008.

But this did not pull back the growth momentum for the whole year. According to the Ministry of Commerce, China absorbed FDI worth $111.17 billion in 2008, up 27.65 percent year-on-year.

In comparison, the global FDI dropped by 21 percent year-on-year to $1.45 trillion, largely due to the 32.7 percent slump in FDI with developed nations, according to statistics from the United Nations.

Although the financial crisis will be continuously exerting a negative impact on the inflow of FDI into China this year, China is still an attractive destination for FDI, the MOFCOM said.

China's main FDI sources viz. the US, Europe and Japan, are languishing and there is no sign that their economies are bottoming out. This has blurred the prospects for FDI into China.

In addition, China's neighboring regions like Vietnam and Thailand have been rolling out preferential policies in recent years to enhance their competitiveness over China.

From January to April, the FDI into China fell by 32.6, 15.8, 9.5 and 22.5 percent respectively year-on-year.

But China's economic growth potential is still a big draw for foreign investors, said the MOFCOM. The nation registered a GDP growth of 9 percent last year, and has set a growth target of 8 percent for this year.

The UN said in its recent report that China will still be the best choice for overseas investment in the long run.

The MOFCOM also predicted that FDI for 2009 would initially drop for few months before gathering pace.

But the UN figures showed that FDI worldwide for 2009 will keep contracting, by around 30 to 40 percent year-on-year.

The MOFCOM has said that the Chinese government would try to improve the investment environment in China by launching more preferential policies and making procedures more convenient and also optimize the FDI structure by encouraging more investment from hi-tech, environmental protection and services sectors.