China says no, but a new report suggests otherwise.
China's Ministry of Commerce spokesperson, Shu Jueting, speaking during a press conference, December 2, 2021. Credit: Ministry of Commerce
For executives of global companies assessing where to build a new factory or set up an office, China was once an obvious choice. But those making such decisions today face a new question: is the world’s second largest economy losing its allure?
China’s official data would suggest not: foreign direct investment inflows (or FDI) into the country hit a record high in 2021, reaching just over $170 billion, according to the Ministry of Commerce. The upward trend continued in early 2022, before turning down in the second quarter of last year.
The headline data, however, belies a gloomier reality when it comes to investor interest in tangible, job-creating projects in China, according to a recent report by research firm Rhodium Group. A significant chunk of the official figures include money flowing into China’s stock and bond markets which, Rhodium says, shouldn’t count as direct investment.
Rising labor costs in China have made it less attractive as an investmen
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