New figures released by the Chinese Ministry of Commerce indicate that FDI (Foreign-Direct-Investment) in China continues unabated. For the first 10 months of 2004, the inflow of FDI reached US$53.8 billion, posting 23% year-on-year growth. The FDI total for the period of January through October 2004 surpassed the FDI total for the entire year of 2003.

 

The number of foreign firms investing in China during the first 10 months of this year totaled 35,202, representing growth of 7.66% year-on-year. Contracted FDI, a reliable gauge of future intentions, totaled US$188.9 billion for the same period, a rise of 34.2% over 2003. Meanwhile, actual FDI grew by 23.5% for a total of US$53.7 billion.

 

These new figures strongly suggest that the macroeconomic control policies that the government started enforcing in April 2004 have so far failed to put a damper on foreign investor's enthusiasm for the China market. It seems that a large portion of manufacturing investment is driven as much by the threat posed by competitors migrating to China as by the promise of a developing domestic market. 

 

Certain voices within China believe that the country is over-reliant on foreign trade and investment, and consequently, calls to lift tax breaks and other benefits offered to foreign companies are increasingly common. The new figures demonstrate that, for the time being at least, local governments in China remain very eager to lure FDI.