Tools: Save | Print | E-mail | Most Read
Target High-quality FDI
Adjust font size:

When making use of foreign investment, the more is no longer the better.

As a champion magnet for overseas investors, China has absorbed more foreign direct investment (FDI) in the past 15 years than any other developing country - and also outdid all developed economies except the United States and Britain last year.

It is more than likely that this will remain the case this year. However, a slight drop in materialized FDI will give the country a chance to refocus its efforts on attracting the most-desired investments.

According to the 2006 World Investment Report, released on Monday by the United Nations Conference on Trade and Development, China was the world's third-largest FDI recipient in 2005 with a total inflow of US$72.4 billion, including US$60.3 billion in non-financial sectors and US$12 billion to the banking sector.

Meanwhile, the country's materialized FDI in the non-financial sectors fell by 1.52 percent year-on-year to US$42.5 billion in the first three quarters of the year.

Slowing FDI growth might be what policy-makers are expecting as the country's foreign exchange reserves fast approach the US$1 trillion mark, the highest of any nation.

The rapid rise in foreign currency reserves is largely caused by the surge of the country's trade surplus. Yet, the continuing inflow of FDI also contributes to the stockpiling of foreign exchange reserves.

Ballooning forex reserves have kept pumping liquidity into the monetary market, making it more difficult for the central government to advance its macro control. Moreover, the long-term cost of keeping such a huge forex reserve has also raised public concerns.

Under such circumstances, the current slowdown in the country's pace of drawing in FDI can more or less ease the mounting pressure that soaring forex reserves put on policy-makers. The central authorities are tightening credit supply to engineer a slowdown of the national economy.

More important, it offers a chance to rethink the country's decades-old FDI strategy.

During most of the past quarter century, governments at all levels in the country have tried to invite as much foreign investment as possible. As a developing country, China used to face serious shortages of capital, management and technologies associated with FDI. The combination of a huge inflow of foreign investment and China's low labour costs have enabled the country's rise as a world manufacturing centre.

But China has increasingly realized that the burden extensive growth puts on its environment and resources is unbearable. It is keen to upgrade its industries to pursue sustainable economic growth.

To that end, the country should make more efforts to attract high-quality FDI aimed at high value-added and knowledge-intensive production.

The still huge inflow of FDI shows that China remains very attractive to market-seeking investors as its economy develops.

Being selective about the quality of foreign investment might cost the country some growth in FDI. But in the long run, it pays to focus more on attracting those investments that can most propel the transformation of the country's growth pattern.

(Xinhua News Agency October 16, 2006)

Tools: Save | Print | E-mail | Most Read

Related Stories
Foreign Investment in China Falls Slightly
China Is World's Third Largest FDI Recipient
Cost-driven Foreign Investment Turns Way
Outbound FDI Picks Up Pace In 2005
July FDI Drops 5.5% in China

Product Directory
China Search
Country Search
Hot Buys
SiteMap | About Us | RSS | Newsletter | Feedback
Copyright © All Rights Reserved     E-mail: Tel: 86-10-88828000 京ICP证 040089号