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Rebound in FDI inflow expected
( 2003-09-19 10:45) (China Daily HK Edition)

China's actual foreign direct investment (FDI) is projected to gain momentum in the fourth quarter although the country posted the second straight monthly decline in overseas investment for August.

Economic researchers have predicted actual FDI to see a rebound in September and hit US$60 billion for the full year if there is no second outbreak of SARS (severe acute respiratory syndrome).

Due to the lingering impact of SARS, actual FDI fell 28.3 per cent during August from a year earlier to US$3.32 billion, following July's drop of 18.8 per cent.

"The lagging influence of SARS (on FDI) has grown more and more noticeable over the last two months," said Shi Yueying, a researcher with the Academy of Macro-Economic Research at the State Development and Reform Commission.

A great number of business events were forced to be suspended or cancelled during April and May when the SARS outbreak reached its peak, hindering overseas investment.

The epidemic outbreak, which killed 349 people in the Chinese mainland, was effectively brought under control only at the end of June.

Shi said the resumption of business travel to China in July and August will help make up the investment shortfalls as investors return to push ahead with their spending plans.

"Because investing in China is a long-term and strategic goal for most foreign investors, foreign capital is not expected to be withdrawn from one of the world's top investment destinations just because of a sudden epidemic outbreak," the researcher said.

"So we estimate that actual FDI will see a full recovery beginning from September."

As a telling sign of Shi's optimism, the investment outlook appears quite strong, according to government statistics.

Data from the Ministry of Commerce suggested that pledged FDI, an indicator of investor sentiment, jumped by 36.95 per cent to US$8.36 billion in August.

During the first eight months of this year, actual and pledged FDI soared by 18.4 per cent and 34.33 per cent respectively to US$36.67 billion and US$67.53 billion.

Encouraged by the strong performance, trade experts have forecast that the country's FDI will top US$60 billion this year, higher than the government target of US$57 billion.

Last year, China overtook the United States as the world's top investment destination, with actual FDI of US$52.7 billion.

Yang Zhongxia, another researcher with the Academy of Macro-Economic Research, said a number of favourable factors are contributing to the investment surge in China.

He noted that more global capital will be channeled into developing countries, of which China is a favoured investment destination, amid sluggish economic recovery in the world's major developed economies such as Japan, the European Union and the United States.

Although the global flow of FDI decreased by 20 per cent to US$651 billion last year, actual FDI attracted to China recorded a rise of 12.51 per cent, according to a recent report by the Ministry of Commerce.

What's more important, Yang said, China's vast market potential, cheap labour cost, improved software and hardware environment for investment as well as the government's pledge to open the economy wider will continue to appeal to overseas investors.

He added that besides the lucrative traditional manufacturing sector, foreign investors can find new growth points to boost returns.

As China is opening up more sectors in line with its World Trade Organization commitments, investment opportunities will arise in a wide range of industries including tourism, retail, insurance, pharmaceuticals and even publishing and media.

By the end of August, China had approved the establishment of 449,926 foreign-funded enterprises, with total actual FDI of US$484.6 billion; and more than 400 of the world's top 500 multinationals have a presence in the country.

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