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FDI Stable, But On The Move

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:

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.

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