China set to attract $100 billion in foreign direct investment

By Aileen Wang and Simon Rabinovitch

BEIJING (BestGrowthStock) – China is on course to attract a record $100 billion in foreign direct investment this year, the commerce ministry said on Wednesday, evidence that it remains a top destination for global firms despite concerns about market barriers and rising labor costs.

China attracted $91.7 billion in foreign direct investment (FDI) in the first 11 months of 2010, nearly 18 percent more than in the same period of 2009, the ministry said.

Along with the general attraction of investing in the fast-growing Chinese economy, spokesman Yao Jian said the service industry had emerged as one focal point for foreign investors.

“The service industry has become the major driving force of the growth in foreign direct investment, which also chimes with the government’s goal of adjusting the economic structure,” Yao told the regular monthly briefing, referring to Beijing’s goal of boosting domestic consumption and relying less heavily on exports.

Top U.S. and Chinese officials are holding high-level trade talks ending Wednesday in Washington on issues ranging from intellectual property rights to investment restrictions and barriers to markets.

Major global firms like General Electric (GE.N: ) have expressed concerns that Beijing’s “indigenous innovation” policies could hinder its ability to compete in China.

But Yao gave an optimistic outlook for the world’s second-largest economy.

“With China’s economy (Read more about the fastest growing economy.) rising further in the future, investment in the manufacturing sector will maintain a stable growth pace and service industry investment will continue to speed up,” he added.

Investment in the services industry accounted for 44.9 percent of total FDI in the first 11 months, compared with 40.9 percent in the same period a year earlier. Yao noted that computer services and real estate were two sectors in which investment was increasing particularly quickly.


The mix of foreign investors in China was tilted heavily toward its Asian counterparts. Hong Kong, Taiwan, Singapore and Japan have been the biggest investors in China so far this year, with the United States only in fifth place.

In November alone, China attracted $9.7 billion in FDI, up 38 percent from the same month of 2009, the ministry said.

Inflows, which surged in the years after the country joined the World Trade Organization in 2001, were hit hard by the global economic slowdown, but have staged a recovery this year.

Although China has a tight regime of capital controls, there is concern that some hot money has been entering the country in the guise of legitimate trade and investment flows. Yao said the commerce ministry would work to ensure that no FDI cash was being illegally redirected into asset markets.

“Our ministry will take further efforts to check the authenticity of foreign capital invested in property,” he added.

(Editing by Kazunori Takada)

China set to attract $100 billion in foreign direct investment