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China' s investment environment improving
Date:2010/9/10      View:853
 
China' s investment environment has been improving, and those foreign firms issuing complaints were just sharing growing pains brought on by the country' s economic restructuring, top officials and economists have said.

"The overall investment environment in China has been improving since the global financial crisis," said Commerce Minister Chen Deming at the ongoing 2nd World Investment Forum (WIF) in Xiamen City in southeast China's Fujian Province.

Though repeating complaints about China' s "worsening" investment climate, overseas investors still cannot help but to flock to China to set up businesses.

During the first seven months, China's FDI increased 20.65 percent year on year to 58.35 billion U.S. dollars, according to the ministry' s latest statistics.

Meanwhile, some 14,459 foreign-invested companies were established in China in the first seven months of 2010, up 17.9 percent year on year.

Foreign direct investment (FDI) this year is set to "surpass 100 billion U.S. dollars," compared with 90 billion dollars last year, an official with the ministry predicted on Sunday.

"It' s not surprising to witness such inconsistency" and the complaints mean that foreign businesses are attaching more importance to the Chinese market, which is becoming the most important market with the strongest purchasing power in the world, said Huang Zhilong, an expert with the China Center for International Economic Exchanges.

Chen Deming said late Tuesday at the forum that it is "understandable" that foreign companies have mixed feelings about investing in China.

Foreign companies, on the one hand, saw in China great industrial growth in the past 30 years since the country' s opening up, its quality of labor resources and the relatively good infrastructure, said Chen.

On the other hand, they also felt the pressure brought on by the increasing competitiveness of China' s growing state-owned and private businesses, he added.

According to Chen, China will continue seeing large influxes of foreign investment in the next few years despite uncertainties in the global economic recovery.

"Currently, many countries and organizations have rated China as the most appealing destination for investment, which probably would not be changed for a few years," said the minister.

GROWING PAINS

The complaints have also reflected how China is undergoing economic restructuring, which is not such good news for foreign-invested industries with high pollution and high energy consumption.

Additionally, with rising labor costs, some foreign companies would surely feel the pressure, said Sun Lijian, an economist with Shanghai-based Fudan University.

In April, the State Council, China's cabinet, introduced a series of innovative measures to optimize foreign investment structures.

The measures included encouraging more foreign investment in high-end manufacturing industries, high-tech industries, modern service industries, new energy, and energy-saving and environmental protection industries.

Meanwhile, foreign firms have been encouraged to move their operations to the relatively poor central and western regions of China.

"Following such measures, business for foreign companies investing in industries that pollute or with low-added value would be more difficult than before," said Sun.

Workers' wages have also risen this year in many companies in China' s coastal areas. Besides, China' s strengthened labor law enforcement also increased labor costs.

"Those foreign companies with no intentions to move to China' s western regions would lose their low-labor-cost advantage and for sure, they would feel 'unhappy' about it," said Huang Jianzhong, an economist with the Xiamen University.

"Foreign firms are not the only ones that felt the pressure, as local firms were affected by the economic restructuring, as well," he said.

However, the bright spots should also be noticed.

Although labor costs are rising in China, the proportion of the educated population is increasing at the same time, said Wang Zhile, a researcher with the Ministry of Commerce.

According to Wang, the measures the State Council issued in April would be regarded as China' s guidance to attract foreign investment for the years to come.

Wang advised foreign firms to adjust their investment strategies in China in accordance with the new measures to grasp the "opportunity" for better development.

Chen Deming also predicted on Tuesday that with the help of such measures, foreign investment in industrial sectors with high technology and high added-value, as well as the service industry, would witness a boom.

FAIR PLAY

Many foreign companies also have concerns about whether they will be treated fairly, like Chinese companies, especially when it comes to government-backed projects and the protection of their intellectual property rights.

"Indeed, there are still some problems existing in China' s investment environment," said Wang Zhile.

However, having room for improvement does not mean the climate is "worsening" , he added.

Over 80 percent of foreign-funded firms take a positive view over the soft investment environment in China, according to a survey report published in August by the China Association of Enterprises with Foreign Investment (CAEFI) and the research institute of the Ministry of Commerce.

Chinese Vice President Xi Jinping vowed Tuesday at the WIF opening ceremony that China will continue to foster a more open and transparent legal system.

He also promised to make government-funded procurement and construction projects open and transparent to both Chinese and foreign-invested enterprises.

According to Xi, foreign-invested enterprises won 55.4 percent of all bids in the international tendering for 12,000 procurement programs of mechanical and electric products in 2009, he said.

Meanwhile, Xi said that intellectual property rights (IPR) protection is high on the agenda of the Chinese government.

China will improve systems, mechanisms, laws and regulations designed for IPR protection to offer more effective and efficient protection to investors and IPR owners, he said.

With the theme "Investment for Sustainable Development," the three-day forum is organized every two years by the United Nations Conference on Trade and Development (UNCTAD), which will discuss the challenges and opportunities for global investment in a post-crisis economy.

The first WIF was held in Accra, Ghana in April 2008.
 
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