Chances of China overtaking the United States as top foreign direct investment (FDI) destination are slim in short-term even as it remains the second most attractive country for investors, China's official daily has quoted a United Nations organisation.
The gap between the US and China would remain despite robust momentum in Chinese FDI even though it is closing in on the FDI volumes, Zhan Xiaoning, director of the Investment and Enterprise Division, Conference on Trade and Development (UNCTAD), was quoted on Thursday by China Daily.
China's economic growth remains high even as the US continues to be troubled by a high unemployment rate and economic slowdown. According to the organisation report, China in 2009 received $95 billion in foreign funds, which was $34.9 billion less than the investments in the US.
Still, China's FDI during the first quarter was $43.8 billion, while FDI in the US fell by 60 per cent from a year earlier to $46.1 billion during the same period, leaving a gap of $2.3 billion.
"Despite the narrowing gap, we cannot find strong enough proof to show that China could surpass the US as the most attractive destination for FDI in the short and medium term, as there is little possibility that China's FDI will grow by large margins," Zhan was quoted by the official paper, China Daily.
According to Wang Zhile, director of the research center on transnational corporations under the Ministry of Commerce, USA enjoys more advantages in aborbing foreign funds than China.
"It has standardised rules and regulations, powerful consumption market and research and development capability and highly talented labourers, all of which are more attractive for investors compared with cheap labourers and high-speed economic growth," Wang said.
According to the UNCTAD, FDI inflow and outflow worldwide this year is forecast to exceed $1. 2 trillion, rising from the bottom during the second half of 2009.
The figure is set to climb to a "level before the financial crisis" in 2012, reaching $1.6-2 trillion. China's outbound direct investment will also see rapid growth in the years ahead as it is "high time" that it invested overseas, UNCTAD forecast said.
China's GDP decelerated during the second quarter of this year to 10.3 per cent as it grappled with the new wave of wage increases following flash strikes but the country remains an attractive FDI destination, barring large fluctuations in the global economy, the Daily quoted analysts as saying.
"China will probably remain as the second largest in terms of FDI volume this year," Zhan said.