This Wall Street Journal article discusses how China is losing foreign direct investment in its low cost manufacturing sector, which includes the production of goods such as shirts and basic electronic components. The production of these goods is now shifting to cheaper production regions such as those of Southeast Asia, in part due to Beijing’s desire to move towards high-value production in order to boost incomes. The author notes how total FDI in China has fallen 3.7% since the beginning of 2012 to a figure of $111.72 billion. However, economists have stated that this drop can also be attributed to the sluggish overall growth in China and the European debt crisis of 2012. Rising costs of production and rising wages in China have also made the country a less appealing source of FDI.
One example of the shift in FDI towards Southeast Asia is the recent decision made by Italian leather producer, Coronet SpA. The company will construct a factory in Vietnam rather than expanding its current one in China’s province of Guangdong due to lower operating costs. Despite the trend in FDI moving away from China, the country remains among the top three locations for FDI for 58% of the 300 members surveyed by the American Chamber of Commerce.