Thursday, April 20, 2006

The BVI as the 2nd largest foreign investor in China

April 14, 2006 the Ministry of Commerce announced that China's actual foreign direct investment experienced a 6.4% year-on-year increase to 14.25 billion USD in the 1st quarter of the year.

In accordance with this statement, the largest sources of foreign direct investment during the period were Hong Kong, the British Virgin Islands and Japan.The 10 largest sources of foreign direct investment (FDI) accounted for 84.75% of China's total actual FDI for the period. So, the British Virgin Islands is the leader following Hong Kong. According to the statement, in the 1st quarter the number of new foreign-funded companies was 8,909, which is down 4.26% year-on-year.

Director of the FDI Research Centre under the ministry, Jin Bosheng suggested that FDI into China is expected to continue increasing steadily for 5 to 10 years. Central China expects to attract further FDI in such industries as high-tech, chemical and auto parts. Jin Bosheng added that China is about to attract more FDI through mergers and acquisitions (M&A), a common practice worldwide.

All over the world, 80% of FDI is obtained through M&A, while the figure is currently 10% in China, where FDI is mainly obtained through investments such as the establishment of new properties.

Jin Bosheng made comments on FDI recover, which should be attributed to China's rapidly growing economy and the nation's efforts to provide a more favourable foreign investment environment.

In 2005 the gross domestic product (GDP) of China reached US$2.23 trillion, the 4th largest in the world, and an increase of 9.9% year-on-year. The head of the National Bureau of Statistics, Qiu Xiaohua suggested that China's GDP is expected to remain stable but fast and increase by 9% this year.

Since China's entering the World Trade Organization, the Chinese Government has been trying to improve the investment environment for foreign companies, improving relevant rules and regulations as well as service quality and opening previously forbidden zones such as banking, retailing and insurance. And China's major FDI sources were Hong Kong, the British Virgin Islands and Japan.

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