06/16/2009, 00.00
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Foreign investment flees China

Direct foreign investment in China is down by 17.8% in May, for an eighth straight month of decline. The flight of foreign capital is hard on the manufacturing industry resulting in heavy job losses.
Beijing (AsiaNews/Agencies) – Foreign direct investment in the mainland dropped 17.8 per cent year-on-year in May for the eighth straight monthly fall, commerce ministry spokesman Yao Jian, revealed today.

The decline compared with a fall of 22.5% in April from the same month in 2008. Experts say it may indicate that the economy is reaching the lowest point of the crisis, but that there are no certain elements to guarantee a quick recovery.

For years the Chinese economic boom was favoured by massive foreign investment by companies who were encouraged to move production to the mainland because of its low manufacturing costs: a low cost labour force with few rights, lands conceded to industries for minimum rents, generous fiscal policies in favour of the foreign companies.  But in the wake of the market contraction, caused by the global financial crisis, foreign investors have preferred to cease production and close down factories.

A direct consequence of this is the grave increase in unemployment, particularly in the labour industry: official data records 30 million migrants who have been made jobless because of factory closures.  Companies financed by foreign investors represent 30% of all industrial output, but over 55% in exports.

The Chinese economy grew by 6.1% in the first quarter of 2009, but analysts believe that the expansion is insufficient to satisfy the increased demand for work.

Experts note that Beijing’s stimulus plan of 4 trillion Yuan (400 billion euro) has so far failed to have any affect on the number, and how it obviously does not benefit foreign investment.


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