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UPDATED: September 18, 2009
Global Investors' Faith in China Swells
China's charm for foreign investors has not waned despite the global credit crunch that dampened investors worldwide, according to a UN report

China's charm for foreign investors has not waned despite the global credit crunch that dampened investors worldwide, according to a UN report on trends in foreign direct investment.

The economically recovering nation also capitalized on the financial crisis by buying cheap overseas assets, according to the World Investment Report 2009 released yesterday by the United Nations Conference on Trade and Development. China is reportedly poised to join the list of top investing nations in the world.

Globally, the infusion of FDI fell from $2 trillion in 2007 to $1.7 trillion in 2008, a 14 percent drop, according to the report.

The report projected that FDI inflows will bottom in 2009, dropping by at least 40 percent, to below $1.2 trillion. A rebound is expected in 2010.

Despite the global gloom, FDI into China in 2008 rose by 30 percent to $108 billion, making it the third largest recipient of FDI in the world, after US and France.

FDI to China dropped by 17.9 percent in the first half of this year, beating the 40 percent drop globally.

Recently, the UN conference ranked China as the most favorite destination for FDI, followed by the US, India, Brazil and Russia.

But growing overcapacity in some manufacturing sectors in China will force the infusion of FDI into Chinese agriculture and services sectors, said Zhuang Jian, a senior economist with the Asian Development Bank.

"As the Chinese government takes steps to support small-and medium-sized enterprises development, new energy and high-tech industries, FDI may flow into these sectors as well," he added.

China is also facing increasing competition to acquire foreign investments for labor-intensive industries from neighboring countries with cheaper labor, said James Xiaoning Zhan, head of the Division on Investment and Enterprise for the UN conference.

He said that China also has FDI competition from developed countries in high-tech industries, such as the green technology sector.

(China Daily September 18, 2009)

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