China's emerging economic centre expects foreign direct investment to fall by about 20 per cent this year, after three consecutive years of massive commitments.
A Shanghai Foreign Investment Commission official said the lag effect of last year's removal of duty-free imports of machinery and equipment for foreign enterprises was likely to be shown in this year's investment figures.
With the removal, foreign investors have to pay duties on imported machinery, raising the cost of doing business in China and hitting small and medium-sized foreign companies.
'The effect of the tariff changes takes time to show, but I expect this to be reflected in our investment figures this year,' the commission's deputy director of project promotion division, Xia Zhongguang, said.
Last year, Shanghai's contractual investment rose 5 per cent to US$11.06 billion, the third consecutive year it surpassed $10 billion. The rise came amid a country-wide trend of declining contractual investment.
China's contractual investment last year fell about 20 per cent to $73.2 billion, although actual investment rose 13 per cent to $42.3 billion.
'This year, I do not think we will attract investment reaching last year's figure of $11 billion,' Mr Xia said.