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Investment shows northward trend
Updated: 2004-05-16 09:24

A large production base of aromatic hydrocarbon with an investment of US$400 million from Republic of Korea-based LG settled recently in Qingdao, a coastal city in eastern China's Shandong Province.

LG dominates the newly-established joint venture, named Qingdao Lidong Chemical Industry, by providing 90 percent of the total investment. The venture, under construction since this March, was scheduled to go into production in early 2006 and will mainly offer such products as benzene and toluene.

According to Sha Hong, an official with the Qingdao Foreign Trade and Economic Bureau, the joint venture is the largest foreign-funded production project ever established in the city.

So far, there are 5,300 foreign-funded companies in Qingdao, which utilized US$947 million of foreign investment in the first quarter of this year, up 73.4 percent over the same time last year.

Besides Qingdao, more and more foreign investment flowed into other cities located in the Bohai Bay Rim, which is surrounded by Beijing and Tianjin municipalities and Hebei, Liaoning and Shandong provinces and is becoming a new favorite destination for foreign investment.

Wei Houkai, a researcher with the Chinese Academy of Social Sciences, pointed out that foreign investment showed the trend of "moving northward" since China's entry into the World Trade Organization (WTO) in 2001.

According to Wei, the foreign investment in the country is transferring and expanding from southern China's Pearl River Delta to the Yangtze River Delta and the Bohai Bay Rim in East and North China.

Statistics from the Commerce Ministry of China showed that the Bohai Bay Rim absorbed over US$14 billion of foreign direct investment last year, up 9.41 percent, far higher than the average growth rate of 1.44 percent of the country. Especially, the investment from the Republic of Korea mostly went to this region.

And the usage of foreign investment in this area accounted for 26.2 percent of the total last year, rising by 1.9 percentage from the previous year.

Researchers analyzed that the Bohai Bay Rim not only has such advantages as having good wharves, improved infrastructures and policy environment adapting to market economy, which are owned by the Pearl River Delta, but also possesses its own good conditions, such as low price of land, heavy chemical industrial groundwork and large sum of oil resources.

Sun Peng, deputy director of the Foreign Investment Bureau under the Commerce Ministry, also said foreign investment in China is speeding up in moving northward to the Yangtze River Delta with Shanghai, the largest industrial city of the country, in the center, from the Pearl River Delta.

According to the statistics, the usage of direct foreign investment by the Pearl River Delta in 2002 declined by over 5 percent from the previous year to US$11.3 billion. Meanwhile, the Yangtze River Delta actually utilized US$17.5 billion of foreign investment, up 30.7 percent.

During the same period, Zhejiang and Jiangsu provinces and Shanghai municipality in the Yangtze River Delta totally made use of over US$18.4 billion of foreign investment, making up one third of the total in the country.

With China's entry into the WTO, foreign investors prefer to regard the country more as an important target market and source of margin than just a manufacturing base for exporting their products.

Many multinationals, including Nokia, Ericsson and Panasonic, had planned to move their regional headquarters to China, and even considered to upgrade their China-based enterprises to global manufacturing bases.

As a result, Beijing and Shanghai respectively located in the centers of the Bohai Bay Rim and the Yangtze River Delta have become the favorite location for their regional headquarters. So far, more than 30 multinationals had transferred their regional headquarters to the two Chinese municipalities.

Motorola, which has largely invested in the Tianjin Economic and Technology Development Zone in the Bohai Bay Rim since 1992, now has become the largest foreign investor in China.

Since the 1990s, China began to attract more and more foreign investors for its possessing a large number of skilled but cheap labor and big consuming market.

China has ranked the first for 11 years in absorbing foreign investment among the developing countries.

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