China saw its foreign direct investment (FDI) continue to grow in 2003.

Although the increase was just 1.4 percent year-on-year, it is in a way more significant than the expected annual growth of the gross domestic product (GDP) of 8.5 percent.

Overseas investors only started swarming back to the country in December after the stalled FDI growth in the previous six months and even drops of more than 30 percent during the same period in 2002.

The slowdown was largely an aftereffect of the outbreak of SARS (severely acute respiratory syndrome), a previously unknown epidemic disease, that was first reported from the relatively industrialized Pearl River Delta in the early months of last year and hit several other major cities from April to June. Among the affected cities was Beijing, the national capital.

It was only after painful efforts, including mobilizing the military's medical service, that the central government managed to bring the highly contagious disease under control.

It took even longer, as it turned out, for the nation to win back the confidence of the overseas business community and attract more FDI. Foreign investors" commitments to China saw an annualized rise of more than 250 per cent in December, showing, once again, that the country is regarded as one of the favorite investment destinations around the globe.

But confidence in China in the post-SARS days is different from that prior to its outbreak. Other than the nation's abundant labor, enterprising culture, and good public infrastructure, such as seaports and inter-provincial expressways, there is a new dimension to the country's allure.

That is the effectiveness of its government, as seen during the SARS fight, to reorient priorities, quickly design contingency plans, calm down a confused public, supervise the grassroots-level assistance and keep situations under control.

Such effectiveness is an assurance for China's investors "an assurance of both the level of service they may expect to get from China and future opportunities in the country.

At the same time, government officials have been addressing "quality of life" issues more often than at any time in the past two decades. This intense scrutiny is driven by a need to further develop the countries public health system and social security net.

This is a good change for China's investors as well as its labor force. First, investors are likely to hire from Chinese workers of a higher quality. They will not only be hard working and relatively inexpensive, but be covered by more adequate healthcare and better living and working conditions. It is the kind of labor that can sustain China's economic progress.

Second, more services will inevitably translate into more development opportunities in the service industries and into a demand for new investment.

Indeed, China can draw little satisfaction from acting just as the world's factory. Its cities should become service centers, not just manufacturing centers. And with a booming service economy, China will be a much greater attraction for overseas investors.

(China Daily January 15, 2004)