FOREIGN investment in Chengdu will drop substantially this year as China's austerity measures continue to bite, city officials say. The Chengdu Municipal Commission of Foreign Economic Relations and Trade expected foreign capital inflows to slide 40 per cent by the end of the year. The commission's executive officer, Sophia New, said foreign investment amounted to only US$200 million in the first nine months of the year. 'There is quite a big drop if you look at the foreign investment for last year which totalled US$460 million. However, the quality of projects invested by foreigners has improved,' she said. Ms New said the biggest decline was in the number of real estate projects, in line with China's property slump. Although foreign investors have become more cautious in investing in Chengdu, other officials maintained a positive outlook. This was because the central government had announced in its Ninth Five-Year Plan it would raise investment to develop the economies of the central and western regions. Foreign investment in Chengdu grew in the last three years, with most of the funds coming from Hong Kong and Taiwan. There are 1,752 foreign firms in the city with project contracts worth US$2.1 billion, 948 of which are from Hong Kong. The main areas attracting foreign investment are export processing, computers, machinery and textile industries. 'Compared to the coastal regions, we are behind in terms of development,' Ms New said. 'Infrastructure projects have also now become attractions for foreign investments because there are preferential policies for such projects.' She said the city's development in the long term was ensured because Sichuan had a population of 111 million people and a big consumer market. Chengdu plans to become the central region's financial, commercial and communication hub. Retail activity was bustling and officials from the real estate bureau said there was strong demand for shop space. 'Another advantage is the lower labour cost,' Ms New said. 'While wages for a factory worker are between 800 yuan [about HK$744] and 1,000 yuan in the coastal cities, it is only half the amount here.'