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China Most 'Attractive' Destination for FDI

China remains the most attractive destination for foreign direct investment (FDI) in the developing world despite the global financial crisis, says a UN report, released on Wednesday.

But this year FDIs across the world will drop 10 percent from the record high of last year because major companies have scaled back their investment plans, the report says.

Global FDIs rose 30 percent to US$1,833 billion in 2007, even though the international financial crisis became evident midway through the year.

Mergers and acquisitions (M&A), major avenues of global capital flow, have already slowed down remarkably, with their value in the first six months being 29 percent lower year-on-year.

Last year, China attracted FDIs worth $83.5 billion, the highest among developing countries and sixth in the world, said the World Investment Report, prepared by the UN Conference on Trade and Development (UNCTAD).

FDIs are increasingly targeting services, high-tech industries and high value-added businesses in China. About half of last year's capital inflow went into the service sector, compared with 28 percent in 2003.

Besides, the number of foreign-invested research and development centers in China has risen from about 700 in 2004 to more than 1,200 this year.

This shows multinationals have changed their stance of considering China as a low-cost production base, and instead see it also as a competitive market. On the other hand, it reflects the government's emphasis on attracting quality FDIs, the report says.

Brazil, Russia, India, the US and China are the five most attractive destinations for global investors, shows a survey conducted by UNCTAD.

And China tops the list because of its strong economic growth and improved investment environment, UNCTAD official Liang Guoyong said.

The global crisis will harm financial agencies, forcing them to curb their investments, he said. Financial companies' problems will shrink liquidity and tighten credit for firms in other sectors too, which means the financial storm will influence the entire business environment.

(China Daily September 25, 2008)

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