BEIJING - Pressures that foreign companies may face in China for pay rises will not dampen their confidence about investing in the country, with the nation set to welcome a new wave of foreign direct investment (FDI) this year, according to a think-tank of the Ministry of Commerce.

Wang Zhile, director of the research center on transnational corporations under the ministry, predicted that China's FDI will "surpass $100 billion" this year.

His remarks were made in response to growing concern that China is losing its charm as a destination for foreign investment as some international companies are reportedly considering moving plants to cheaper Asian markets. This follows calls for higher pay at some factories of overseas investors including Foxconn and Honda in southern China.

"I do not agree that labor costs are the most important factor attracting foreign investors to China as was the case several years ago. Such a decision is based on a number of factors, such as China's huge potential as a consumer market," said Wang.

"China is becoming more and more appealing to foreign enterprises as the FDI environment improves."

Brewing giant Carlsberg said on Thursday that it has agreed to pay $379 million to become the leading stakeholder in Shanghai-listed Chongqing Brewery. PepsiCo announced last month it would invest another $2.5 billion to build more plants in China in the next three years, following its $1 billion four-year investment plan unveiled in late 2008.

In early April, the State Council issued new FDI development guidelines which include preferential policies for land use and tax, encouraging investment in renewable energy, high-technology and service industries, and moving into central and western areas of the country.

The guidelines include a measure allowing local authorities to approve foreign projects of up to $300 million, compared with a previous cap of $100 million.

"It is an undeniable truth that there were cases of restrictions and discrimination involving the operations of foreign enterprises in China in the past few years, but the guidelines will make this a thing of the past as they provide real measures to improve the investment environment," said Wang.

Despite the global financial crisis, China remains the world's most attractive destination for FDI. Last year, China's FDI dropped 2.6 percent to $90 billion, while the decline was 39 percent worldwide during the same period.

China's FDI grew nearly 25 percent in April, the ninth consecutive month of positive growth since late 2008.

The Ministry of Commerce is expected to release May's FDI figures on Saturday.

China Daily

(China Daily 06/12/2010 page9)