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China takes heart from trendsetter FDI figures

Source:   Time:

FOREIGN direct investment in China advanced for the 10th straight month in May, as the world's third-largest economy sustained its growth momentum against the spreading European debt crisis.

The accelerated expansion of overseas investment added to evidence that China would remain an attractive destination for overseas capital despite growing concerns about higher labor costs, officials and analysts said.

FDI in China jumped 27.5 percent last month to US$8.13 billion, the Ministry of Commerce said on Saturday. That compared with an increase of 24.7 percent in April.

In the first five months, overseas investment increased 14.3 percent to US$38.9 billion.

During the period, 9,638 overseas-funded firms were set up on China's mainland, up 22.2 percent year on year.

"That could be a vote of confidence after recent reports about higher labor costs in the country," said Wu Ke, a Zhongtian Investment Consulting analyst.

"China is no longer purely a manufacturing factory - it has a huge market as the government spurs domestic investment and consumption."

The nation's retail sales rose 18.7 percent year on year in May while exports soared 48.5 percent from a year earlier, the biggest monthly gain in more than six years.

The State Council, China's Cabinet, in April issued new rules to offer more support for overseas investors in high-tech and services industries.

A spate of conflicts between manufacturers and employees over wages and working conditions has recently come under the spotlight, prompting media speculation that overseas investors may be deterred by higher labor expenses on the mainland.

In the wake of worker suicides, Taiwan-based electronics maker Foxconn Technology said this month that it would increase wages at Shenzhen-based factories in Guangdong Province to up to 2,000 yuan a month in October from 900 yuan in May.

Japanese auto maker Honda agreed to raise salaries by 24 percent to workers at a parts factory in Foshan, Guangdong Province, after a strike there caused a production halt in China.

Yao Jian, a spokesman at the commerce ministry, said on Saturday that cheap labor costs were no longer the top attraction for overseas investment.

"Currently, China's key advantages lie in its stablepolitical environment, rapid and sustained economic growth as well as improvement in the legal environment," he said.

Yao said 63 percent of products made by 290,000-odd overseas-funded firms in China went to Chinese customers.
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