China

By October, FDI into China had overtaken inflows during the whole of 2003. Ministry of Commerce data showed FDI of $53.781bn was recorded in the first 10 months of 2004, up 23% year-on-year. More than 35,000 new foreign capital supported ventures were approved. But robust indicators for October show investors are undeterred by reports that the economy may be over-heating and is vulnerable to a hard landing. Other data showed growth in industrial production, consumer prices and money supply is easing up.

Stimulated by the government’s economic reform initiatives and its increasingly welcoming stance towards foreigners, China’s economy has averaged 9% growth per year over the past two decades. With the government opening up previously closed sectors of the economy, in line with WTO requirements, foreign interest is set to intensify.

China has two principal attractions: low-cost labour and an enormous domestic market of 1.2 billion consumers. The investment climate has opened up gradually. In the 1980s, foreigners were restricted to export-oriented joint ventures with Chinese firms. In the early 1990s, they were allowed to manufacture goods for sale in the domestic Chinese market; and by the mid-1990s, the establishment of wholly foreign-owned enterprises was permitted. China’s accession to the WTO, however, forces the government to open up the services sector.