FDI Stable, But On The Move

Related entries: Business Issues, Corporate News, General, Investment

Actual foreign direct investment (FDI) in China rose by 6.4 percent, year-on-year, to US$14.25 billion in the first quarter. The total FDI for the year is estimated to be US$60 billion, about the same as in 2005.

While the amount remains the same, the destination of foreign capital is changing, with more focus on second tier cities and western China. The FT notes that:

    ”According to a study by Jones Lang LaSalle, the property consultancy, about 80 per cent of multinational companies operating in China are present in Beijing and Shanghai. More than half have offices in Guangzhou and one-third are in Shenzhen, both in the southern Guangdong province.

    Only about 20 per cent operate in Chengdu, capital of the south-western province Sichuan and even fewer are present in other second-tier cities such as Nanjing, near Shanghai, and Shenyang, in the north. Motorola, for example, is present in Chengdu, Tianjin and Nanjing. Siemens has operations in Hangzhou and Nanjing. But when asked about future expansion plans, some unfamiliar names, such as Dalian, Chongqing and Tianjin, pop up.”

Despite attractive cost savings, and new potential customers, some of these emerging areas lack high-quality services such as schools and hospitals – not to mention entertainment and social considerations. As a result finding the staff to manage these outposts is a major challenge.

The growing interest in the western region is reflected in the fact that over 3,000 people from 45 countries a trade and investment fair in Xian in April. 83 Fortune 500 companies have now set up in the city – up from just 24 a year ago. Meanwhile, the Ministry of Commerce has reported that, in the first two months of this year, more than 200 overseas enterprises received approvals for operations in the region with total actual investment up 51 percent year-on-year.

However, the west still has a long way to go – Guangdong Province, in the south, led the way with 58,800 foreign-funded enterprises being approved in 2005 with total investment of US$12.4 billion (up 23.5 percent on 2004). The province now has 119,700 foreign-funded projects, with US$265 billion in contracted investment.

China Business Services provides a range of strategy and investment services in China. Please contact us to discuss your requirements.

See news sources:

    Foreign Investment in China Rose 6.4% in First Three Months
    Bloomberg – USA
    April 14 (Bloomberg) — Foreign direct investment in China, the world’s second-largest recipient of funds from abroad, rose 6.4 percent in the first three …

    More transnational companies turn to China’s west
    Xinhua – China
    clinched a deal this week with the high-tech development zonein Xi’an to build a global R&D center in this capital city of northwest China’s Shaanxi Province. …

    There’s more to China than just the biggest cities
    FT (Subscription)
    Anyone thinking of working in China should pick up a map and look for Shenyang, Hangzhou and Qingdao. These second-tier Chinese cities may not be familiar to foreigners who have not visited the mainland but more multinational companies are setting up offices there. Mar 30 2006 | Read

    Guangdong leads China in foreign-funded enterprises
    People’s Daily Online – Beijing,China
    South China’s Guandong Province has approved 58,800 foreign-funded enterprises by the end of 2005, ranking first in the country, according to the local …

One Response to “FDI Stable, But On The Move”

  1. Archive » Profiting from Private Equity| China Business Blog Says:

    […] ile foreign investment is still flooding into China at a rate of over US$1 billion a week (see here), there is increasing activity on the private equity front – it is estimated that ove […]

Leave a Reply

You must be logged in to post a comment.