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China's FDI edge gaining in global crisis - study
February 20, 2009 / 8:37 AM / in 9 years

China's FDI edge gaining in global crisis - study

SHANGHAI, Feb 20 (Reuters) - The global financial crisis has made China more attractive for direct foreign investment than other countries due to its relatively strong growth prospects, a study by the American Chamber of Commerce in Shanghai and consultants Booz & Co. showed.

“Despite the global downturn, China is still considered a growth market,” Ted Hornbein, managing director for Asia for Richco Inc and governor of the American Chamber of Commerce in Shanghai, told a briefing on Friday.

The study found that the number of companies expressing concern about China losing its competitive edge to lower-cost countries such as India and Vietnam fell by more than half from the previous year’s survey.

Nearly half of the respondents also expressed an interest in expanding their mainland production capacity over the next couple of years, the study said.

“A lot of people expected the economy in China to slow down, but at the same time on a relative basis in fact their expectation in China has gone up from a global perspective,” Edward Tse, managing partner for Greater China at consultants Booz & Co., told the briefing.

“On the one hand global CEOs are saying we are a bit more constrained on resources now, in terms of capital. At the same time, we need to get more from China.”

China’s foreign direct investment in January tumbled 32.6 percent from a year earlier to $7.54 billion, although the figure was distorted by the timing of the Lunar New Year holiday, which fell in January this year and in February last year.

A Commerce Ministry spokesman also noted that the figure was in line with the average monthly FDI inflow of $7.7 billion last year and above the average inflow of $6.2 billion in the few months after the deepening of the financial crisis in September. [ID:nPEK318604]

But the survey made clear that China is hardly immune to the global economy’s woes.

The survey, which initially took replies from 108 companies through September, gathered follow-up data from 79 respondents in November and December and found that 45 percent had experienced a decline in exports of more than 10 percent, while discovering a significant drop in domestic sales.

Reporting by Edmund Klamann; Editing by Jacqueline Wong

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