Overseas investors pump US$46b into mainland
The mainland attracted a record US$46.84 billion in foreign direct investment (FDI) last year.
The figure - slightly above expectations - represented a 14.9 per cent increase on 2000, according to Ministry of Foreign Trade and Economic Co-operation (Moftec) figures.
Contracted FDI, which reveals future investment intentions, rose a year on year 10.43 per cent to US$69.19 billion - the highest level since 1996.
Credit Suisse First Boston chief regional economist Tao Dong said: 'The significance of China's FDI is its continuing growth momentum. It reflects China's growing domestic market, low production costs and more integration in the Greater China region.'
In recent years the mainland has been the world's second-largest recipient of FDI, after the United States.
While FDI made up only about 4 per cent of last year's US$1.19 trillion gross domestic product, it played a key role in driving mainland job creation, domestic demand and export growth.
About half of the nation's exports were churned out by foreign-invested companies - totalling 390,484 as at the end of last year. Many more multinationals are setting up shop in China to take advantage of cheap labour and land.
'Without the continuing FDI in the past few years, I can't imagine China being where it is today,' Mr Tao said, referring to the quality of growth and structural economic changes that have taken place.
'FDI inflows are helping to make the transition in China's economy - from a state-controlled one to a more dynamic and robust market economy,' he said.
Foreign investors have entered China in anticipation of greater market access as a result of membership of the World Trade Organisation.
The September 11 terrorist attacks in the United States had a relatively small impact on China's FDI. It continued to post double-digit monthly increases for the subsequent two months until November 30.
Chinese officials expect to see a higher level of foreign participation in the mainland's services sector, which has seen unprecedented openings.
Last year, multinationals such as chemical giants BASF and BP Amoco followed the lead of Royal Dutch/Shell in setting up multi-billion-dollar petrochemical plants on the mainland - and in the process helped boost last year's FDI figures.
Investors from Taiwan braved the political tension across the strait by making hefty investments. Taiwanese companies in search of cheap labour and affordable land invested about HK$17.7 billion in China in the first 10 months last year.
The investment flow from Taiwan is set to experience quantum leaps following Taipei's lifting of its 50-year ban on direct trade and investment on the mainland. Taiwan's WTO entry also triggered freer trade and investment within the region.
Yet Hong Kong was expected to become China's largest single foreign direct investor - based on Moftec figures for the first 10 months.
FDI pledges from Hong Kong were US$13 billion, which comprised more than 30 per cent of the overall FDI committed during the period.
A proposed free-trade area between Hong Kong and the mainland is expected to bolster business relations and economic activity.
Mr Tao expected China's FDI this year to increase 10 per cent on last year's total.
Last year, Foreign Trade Minister Shi Guangsheng forecast that FDI would hold steady at an annual average of US$40 billion during the next five years.
A stable political and economic environment, relatively low production costs and a huge domestic market are some of the draw cards.