Investment in China Up 55%, Continues Climb

Foreign direct investment in China continues to climb, reaching $20.52 billion in the first eight months of the year, up 55% on the same period a year ago, the official China Daily reports.

The paper said the rise had come despite a dip in the number of new projects. Tighter government curbs on real estate speculation have deterred property investment, particularly from Hong Kong, Taiwan and Macanese companies.

Instead, more money flowed from Japan, Europe and the United States into China’s machinery, electronics and chemical sectors, matching the government’s industry development plans, the paper said.

The average investment per project in the first eight months of the year was $1.7 million compared with $1.3 million for the same period in 1993.

The latest investment figures from the trade ministry show the inflow of foreign cash from abroad has maintained the pace of the first half of the year, despite increasing signs that the economy may be overheating again.

Recent economic statistics indicate the economy is gathering steam, with industrial output, inflation and retail sales on the rise after showing signs of easing in the first and second quarters of the year.

The report said China is on course to reach $30 billion in foreign investment this year, up from the $26 billion recorded in 1993. Last year, only the United States, with $32 billion, attracted more investment from abroad.

The report was not entirely praiseworthy of foreign investors, however, noting that China had revoked the business licenses of some 7,000 joint ventures for poor performance or wrongdoing.

It said that some investors had come to China will the sole purpose of taking advantage of tax breaks and had abandoned the country when their breaks expired.

A separate report in the China Daily last weekend said that as much as 51% of all joint ventures in China will lose money this year. It blamed the losses on the initial costs of setting up operations in China, but also said many companies make “artificial” losses to avoid paying tax.