China's western region, with its lower land and labor costs, isbecoming a new hot spot for foreign investment. That is good news for the entire country, a large part of whichremains relatively underdeveloped. But should the eastern coastalregion be worried that sharing foreign investment with the westwill stall its growth? Not necessarily, according to analysts. First, more investment in the west doesn't necessarily mean less inthe east. Foreign companies could just be investing more. Second, even though some investment will be diverted to the west,this is chasing lower labor and land costs, which the east is nolonger able to offer at its current stage of development. For now, a larger part of foreign direct investment still goes tothe east, but FDI to the west is growing at an astonishing rate. In 2011, FDI to China as a whole stood at $116 billion. Only around$12 billion went to the west. But the west saw a growth rate of 28percent, more than four times the rate in the east. A report by the Economist Intelligence Unit singled out Chongqingas an example of investment moving inland in China. In FDI terms, it went from 22nd place out of 31 provinces,autonomous regions and municipalities on the mainland in 2007, toovertaking Beijing in 2011, when the western metropolis attracted$10.8 billion in investment. The trend is expected to continue, with the city set to overtakeTianjin and Shanghai by 2014. "It's just natural that some industries are going to the west afterlabor and land prices have shot up so much in the east over thepast decade. Meanwhile the market in the west is also maturing,"said Sun Lijian, a professor at the School of Economics at FudanUniversity in Shanghai. That is not bad news for the east, Sun added, as it can focus onindustries with more added-value. In fact, the central government has been encouraging theeast-to-west industry transfer. A document released last year said that moving labor-intensiveindustries to the west is an "inevitable requirement" if the nationwants to upgrade its industries. A typical example of this transfer can be found in Shanghai.Formerly a manufacturing center, the manufacturing capacity of thecity, which is aiming to become a global financial center, has beenmoving to the surrounding Yangtze River Delta. As part of this trend, US firms are moving their high-endmanufacturing capacity from Shanghai to the delta. In a recent survey conducted by the American Chamber of Commerce inShanghai, two-thirds of respondents said they imported parts orfinished goods from the United States into China to support theiroperations in the country, where around 200 AmCham Shanghai membersproduce products in the Yangtze River Delta. Companies used to regard the delta primarily as Shanghai's"backyard", but it is gradually becoming a "one-stop shop" forinnovation and design, finance, manufacturing, marketing and sales,said Aaron Lo, a partner at KPMG. According to AmCham Shanghai President Brenda Foster, there is aclear trend that more members are expanding from Shanghai to thedelta region, encouraged by policy incentives, lower costs andopportunities to extend their market penetration. "We see enlightened local governments in second-tier cities likeNanjing and Suzhou, who are very proactive in seeking investment,offering incentives, and they usually have a clear business plan asto what types of industries they want to develop," said Foster. For example, special zones have been set up, such as SuzhouIndustrial Park, with small and medium-sized enterprise centers andresearch facilities to attract investors. The transfer is a natural outcome, said Foster, citing Shanghai asan example. As the city develops into a major hub for finance andservices, its industries are moving to surrounding areas. "The market in the delta is still unsaturated. A growing middleclass with an increasing disposable income drives many businessesto integrate their regional sales, manufacturing functions and evenR&D into the region," she said. As this transfer gathers pace, a domino effect is being witnessed. While many high-end manufacturers move from Shanghai to the YangtzeRiver Delta, their low-end colleagues are moving from the delta tothe west. For example, Samsung Electronics Co Ltd, decided last month to setup a memory chip plant in the northwestern city of Xi'an. Foxconn,a manufacturer of Apple iPhones and iPads, already has amanufacturing site in Chengdu, Sichuan province. "It's a trend that foreign investment in low-end manufacturing goesto the central and western regions. But capital andtechnology-intensive industries will stay in eastern China," saidSun from Fudan University. We are high quality suppliers, our products such as China Handmade Scented Candles , China Flameless LED Candles for oversee buyer. To know more, please visits Scented Pillar Candles.
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