China attracts foreign investors

01 March 1996 00:00  [Source: APC]

OVER THE past few years multinational chemical companies in Europe and the US have been pouring resources into new facilities in China, contributing towards a huge increase in the country's aggregate foreign direct investment (FDI).

New data show that FDI in China increased by almost 12% last year to US$38bn, raising the cumulative FDI since China opened its doors to foreign investors in the late 1970s to $133bn. This total makes China easily the biggest recipient of funds by overseas countries among the developing nations. Contracted investment for 1995 was $90bn, up by 11%, although the number of new projects was 22% lower, reflecting a trend towards investors choosing fewer but larger projects. By the end of 1995 Beijing had approved more than 250 000 projects.

According to Hu Zhaoqing of China's ministry of foreign trade and economic cooperation, the country has successfully managed to redirect investment towards such priority areas as infrastructure, property and transportation. China has also made progress in attracting multinational companies to increase stakes in existing projects and this helped to increase the average investment in each project to $2.45m from $1.77m in 1994.

Hu expected foreign investment to continue its strong growth in 1996, and did not think that removing tax exemptions for capital equipment imports would alter this trend. China is to abolish preferential taxes on equipment imports for foreign funded enterprises from 1 April. Beijing has allowed a three-month traditional period for implementation of the new arrangements. Foreign invested enterprises established before the end of last year would be given a one- to two-year grace period.

Meanwhile, China's foreign trade is expected to grow by 12% annually over the next five years and exceed $400bn by 2000, according to the government's customs administration. China's two-way trade increased strongly in 1995 to $281bn, an increase of 18.6% over the previous year, ranking China at number 11 among the world's trading nations last year. The country's trade surplus reached some $16.69bn, compared with only $5.30bn the previous year. Exports increased by 23% while imports were 14.2% higher.

In its annual report the customs administation said that China's tight credit policy, aimed at curbing inflation, would help to boost exports and dampen domestic demand. The report also forecast that imports would increase by 12% over the next five years in response to deregulation of foreign trade, huge foreign exchange reserves and cuts in import tariffs.

It expects average annual GDP growth of 8.7% up to 2000, together with a 10% rise in industrial output. Machinery production is expected to be a major part of the increase, and this sector is specifically identified as being a key sector in China's ninth Five Year Plan (1996-2000). Beijing is encouraging industry to produce more sophisticated items for the international market. 'The aim of promoting enterprises to produce more quality products with higher added value should help quiet dumping complaints against China,' said the report.

China, which has been rapidly expanding, with average GDP growth of more than 10%/year over the past five years, has attracted repeated allegations of dumping. The report based its predictions of a continuing strong rise in machinery exports on forecast growth in world machinery consumption of 10% annually.

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