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China drew 2.2% more FDI 
Last Updated(Beijing Time):2005-05-12 17:22

Foreign direct investment in China rose 2.2 percent in the first four months as companies including BASF AG and STMicroelectronics NV expanded to tap rising demand and low wages in the world's fastest-growing major economy, according to a Bloomberg report.

Overseas investment rose to $17.5 billion, the Beijing- based Ministry of Commerce said on its Web site today. Contracted foreign investment, or investment pledged but not yet used, rose 8 percent from a year earlier to $50.2 billion, it said. The figures indicate investment growth may be slowing from 9.5 percent during the first quarter and 14 percent for 2004.

"Investment seems to be reaching a plateau, but you have to bear in mind that actual investment can be sporadic." said Tai Hui, a senior economist at Standard Chartered Bank in Hong Kong. "It fits in with the story of moderating growth in the economy."

The government is trying to rein in economic growth in China, where the economy in 2004 expanded 9.5 percent, the fastest pace in eight years. The nation continues to attract companies seeking to sell cars, mobile phones and computers. Low wages are encouraging companies to move export bases to China.

"We want to be where our customers are, therefore today, China is the focus of our investment," Juergen Hambrecht, chief executive of BASF, the world's largest chemical maker, said April 28 in Mannheim, Germany.


The company's $2.9 billion petrochemical complex in the eastern city of Nanjing built with China Petroleum & Chemical Corp. will start commercial operations later this year supplying chemicals used to make plastics, baby diapers and paints.

The Ludwigshafen, Germany-based company expects China to become the second-biggest chemical market by 2015 as the number of consumers with annual purchasing power of $10,000 or more rises more than ninefold to 700 million from 76 million in 2001, Hambrecht said in a Sept. 22 interview.

China, the world's biggest market for mobile phones and the third biggest for cars, was the world's second-largest recipient of foreign investment last year, attracting a record $60.6 billion, the commerce ministry said Jan. 13. The government predicts the nation will draw a similar amount of investment in 2005.

Demand for housing, mobile phones and cosmetics is rising in China as economic expansion puts more money in consumers pockets. Per capita disposable income in urban areas, home to a third of the nation's population, rose 11 percent to 2,938 yuan ($355) in the first quarter, and those in the countryside increased 16 percent to 967 yuan, the statistics bureau said on April 20.


Avon Products Inc., the world's biggest direct seller of cosmetics, said on April 28 that first-quarter sales in China rose nearly 40 percent and expects sales to treble to $600 million by 2007 from $200 million last year.

The company will make "heavy investment in advertisements and product innovation and investment in manufacturing and IT" in China this year, Chief Executive Andrea Jung said, without specifying any figure.

China's Ministry of Commerce revises foreign investment figures. Actual investment in the first four months of 2004 stood at $19.6 billion, the ministry said last May. That figure has been revised down to about $17 billion based on today's announcement. 
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