Investors still flocking to China - Update - Statistical Data Included

Business Asia, Sept, 2002

Foreign direct investment in China rose by more than a fifth in the first seven months of this year as overseas manufacturers expanded in the country to cut costs and break into the world's largest consumer market. Investment rose 22 per cent during the seven-month period from the same period last year to US$29.5 billion ($54.7 billion), the Trade Ministry reported on its website. That means investment surged 42 per cent to US$4.96 billion in July alone, based on comparisons with figures released earlier. In the first half, investment grew 19 per cent. Rising foreign investment, exports and government spending helped China's economy expand eight per cent in the second quarter from a year earlier, outpacing the rest of Asia. Companies such as Japan's Honda Motor and Taiwan Semiconductor Manufacturing plan to build factories in China to escape higher costs at home. China's admission to the World Trade Organisation last year is also forcing the country to open its domestic industries to more-competition, giving overseas companies greater access to the country's 1.3 billion consumers. Contracted foreign investment, a gauge of future projects, surged 35 per cent to $54.4 billion in the first seven months of 2002.

* Japan

Japan's economic recovery is being threatened by the slump in global shares and the sliding dollar, according to the central bank. "Uncertainty regarding external conditions seems to have increased," the Bank of Japan said in its monthly economic report. "Further destabilisation in currencies and financial markets could easily exert a negative influence on the economy." The central bank left unchanged its overall assessment that rising exports and factory production is helping the world's second-biggest economy "stabilise". There are already signs Japan's economy is faltering after growing for the first time in a year in the first quarter. Exports, which accounted for half that growth, fell for the first time in six months in June. Factory production fell in June, and last month the Government forecast machinery orders, an early indication of business spending, will fall 3.9 per cent this quarter.

* Malaysia

Malaysia has allowed developers and contractors to hire Indonesian workers again to relieve a labour shortage in the building industry following a crackdown on illegal workers, according to Deputy Prime Minister Abdullah Ahmad Badawi. The decision comes after developers and contractors complained they couldn't replace the Indonesian workers who were forced to leave the country. The Cabinet Committee on Foreign Workers decided in February to stop the recruitment of Indonesian workers for the building industry. Malaysia said in January it wanted to halve the number of Indonesians in the country to 450,000 after 400 Indonesian textile workers rioted when police tried to arrest 16 of their co-workers on suspicion of using drugs.

* Philippines

The Philippines attracted US$186 million ($346 million) of foreign investment from January through July, almost a 10-fold increase from a year earlier, according to the Philippine Star, citing data from the central bank. The figure, which deducted investment that left the country, was higher than the US$22 million posted a year ago, the paper said. The funds were invested in stocks and government securities. The Philippines, which has posted budget deficits since 1998, needs foreign funds to help finance the construction of roads, bridges and other public works projects.

* South Korea

South Korea has scope to increase spending to counter an economic slowdown while maintaining a budget surplus, says a presidential aide. South Korea is counting on exports to fuel economic growth of six per cent this year, double last year's pace. That may be threatened by slowing growth in the USA, where the Federal Reserve says the risks of an economic slowdown outweigh the risks of inflation. "If the US economy slows we'll use fiscal policy in a flexible manner in order to boost domestic demand," Lee Ki Ho, the president's economic adviser, told the Korea Chamber of Commerce and Industry. "That's still within posting a budget surplus this year." The Government has forecast six per cent economic growth this year and will try to keep inflation below three per cent. In the first quarter, Korea's gross domestic product grew 1.8 per cent from the fourth quarter--the fastest pace in 1.5 years--and expanded 5.7 per cent from a year earlier.

* Taiwan

The Taiwanese Government has said that Chinese companies wanting to invest in Taiwan property may start sending in applications, as it opens its real estate market to mainland investors for the first time. It is the latest attempt by either side to build economic bridges, while the issue of Taiwan's political status remains in stalemate. The Ministry of the Interior said mainland investors will be allowed to buy Taiwan's residential and commercial property as long as it's not high rise or near a military installation. Limits will be placed on how much investment will be accepted. The announcement comes at a time when Taiwan is hungry for investment after suffering its first recession last year.