CHINA- BEST FDI DESTINATION

Reasons:
1. Rapid economic growth since reform period.
2. INFRUSTRUCTURE AVAILABILITY.
3. ABUNDANCE OF LABOR AND ITS LOW COST.
4. RAPID EXPANSION OF CHINAs DOMESTIC MARKET.
5. Increased integration with the world.
6. LABOR laws
7. POLITICAL SYSTEM AND STABILITY.
EXPLANATION
For the first time since 2003, China has surpassed the United States as the worlds
largest recipient of global foreign direct investment (FDI). During the first six months
of the year, FDI flows to China total $59 billion, a slight decline from $61 billion in the
first half of 2011. Meanwhile, FDI flowing to the U.S. reached $57.4 billion, a decline
of 39.2 percent from a year earlier, according to the Global Investment Trends
Monitor released by the United Nations Conference on Trade and Development.
Although China re-claiming its leadership in FDI had as much to do with the fall off in
FDI flows into the U.S. as it had to do with events in China, it nonetheless
underscores Chinas continued attractiveness as a destination for foreign
investment. Although economic growth has declined to its current level of 7.5 to 8.0,
percent due to a slowing rate of growth in infrastructure spending by the government
and relatively restrictive monetary policies, the China economy is undergoing a
fundamental shift where domestic consumption is becoming one of the key drivers of
the economy.
For example, retail sales growth ticked up to 14.2 percent in September, compared
to 13.2 percent in August. As a result, the reasons companies give for investing in
the country have changed. According to Zhang Xiaoji, director of the Foreign
Economic Relations Development at the Development Research Centre of the State
Council, a top government think tank, Chinas biggest attraction to global investment
is now its huge market, contrasting the long-time low cost, which is now ranked third
or fourth.
In addition to growing consumer demand, investors will be heartened by several
economic measures released last week providing further evidence that the Chinese
economy may have indeed turned the corner.

The most recent figures for the Purchasing Manager Index (PMI) indicate that the
Chinese economy has regained some manufacturing momentum. The PMI hit 50.2
in October, up from 49.8 in September and 49.2 in August, according to the National
Bureau of Statistics. A reading above 50 indicates an expansion in manufacturing.
Despite lending curbs and administrative restrictions on home purchases that have
been in place since 2010, housing prices have also re-gained momentum. House
prices in Chinas 100 major cities rose further in October, marking the fifth
consecutive monthly increase this year. The average price of new homes in these
100 cities increased 0.17 percent month-on-month to 8,768 yuan ($1,390) per
square meter last month, the same growth rate as in September. Average newhouse prices in 10 key cities, including Beijing and Shanghai, rose 0.33 percent on a
monthly basis to 15,625 yuan ($2,508) per square meter.
Apart from the general economic improvement that seems to be underway, new
sectors of Chinas economy are opening up for overseas investors and companies
as the countrys priorities shift. Samuel Allen, the chief executive officer of Deere &
Company (NYSE:DE), the worlds largest agricultural machinery manufacturer, said
last week that the U.S. company will invest further in China over the next few years,
as the country strives to update and improve the agricultural sector to feed its
growing population. Chinas governments plan is to introduce more advanced
agricultural machinery in order to raise the countrys grain yields by 20 to 30 percent.
We will continue to invest in China, on localizing our production facilities, on
research and development centres, and by optimizing our current facilities, Allen
told a news conference in Harbin, the capital of Heilongjiang province. Allen was
there to open Deeres latest site in the country, a 1.6 billion yaun ($250 million)
investment covering 400,000 square meters that encompasses R&D facilities and an
assembly plant. The plant will produce nearly all of Deeres agricultural machinery
models.
Despite the recent economic slowdown, Allen said that John Deere has a
solid perspective for its business in China over the next 20 to 30 years, partly
because of the sheer size of the countrys market, but also because of its
need to boost food production as the population rises.