Foreign firms still looking to the east

The well-developed infrastructure in the coastal area, with its dense transportation network and supporting industrial facilities, has been a strong draw for global investors

Despite rising costs in recent years, China's eastern region remains a strong attraction for foreign investors, thanks to its well-developed industrial facilities and infrastructure, as well as easy access to the domestic market, businessmen said.

"Back in the 1990s, we saw China as an important labor force. But now China's our consumer market as well as a talent pool," said Li Chengchun, vice-president of Samsung Electronics (Suzhou) Semiconductor Co Ltd.

"China remains our top investment destination, although we don't exclude the possibility of investment in Southeast Asia to take advantage of the labor force.

"As for high-end industries, China, especially the eastern region, still has great scope for development," Li said.

He added that business in the Chinese market had shown the fastest growth in recent years among the South Korea-based electronic giant's major markets.

At the same time, the Chinese government's move to raise household incomes has been unleashing consumer demand.

The Samsung factory was established in 1994 in Suzhou, Jiangsu province. Suzhou is about 80 km northwest of Shanghai, an economic hub connecting several cities via a network of highways and high-speed railways.

China was the world's second-largest recipient of foreign direct investment last year. Stable FDI inflows play an important part in the healthy development of the world's second-largest economy.

The nation's non-financial FDI inflows edged down 3.7 percent year-on-year to $111.7 billion in 2012, amid an 18 percent decrease in global FDI.

In the January-October period this year, non-financial FDI inflows to China went up 6.2 percent from a year earlier to $88.6 billion, according to the Ministry of Commerce.

During that period of 2013, non-financial FDI in the eastern region went up 5.6 percent to $74.2 billion, about 83.7 percent of the country's total.

Foreign investment in the central region rose 12.3 percent to $7.84 billion, accounting for 8.8 percent of the total, while FDI in the western region increased almost 6.1 percent to $6.6 billion, making up 7.4 percent of the total

Timo Johansson, general manager of UPM (China) Co Ltd, the Changshu, Jiangsu-based subsidiary of a Finnish paper maker, said: "In China, paper use is still growing, and that's expected to continue. Meanwhile, the paper business is decreasing in the European Union."

"We plan to increase investment in China. Our business in China serves the whole Asian market.

"Although labor costs are rising about 10 percent each year, we are more focused on the market potential and, most importantly, people are skilled here," Johansson said.

"Human resource costs not only include wages, but also whether you can get suitable employees," Johansson added.

Improved research and development facilities in the eastern region have helped to increase investors' interest.

"In view of the huge market size of China, we have a slogan: 'Building a second Samsung in China'. That's unprecedented," Li said.

"Increasing research and development investment is a necessity, because only Chinese talent understands the local consumer market," he said.

Although the best graduates from China's many institutions head overseas for further study, or join government agencies and State-owned enterprises, Samsung can still attract enough researchers because of the nation's huge population, Li added.

Zhang Yilin, deputy managing director and president of the automotive unit of Schaeffler Greater China, said: "China's research strength is increasing very fast. The enthusiasm of our researchers is stronger than that of their German peers. In a few years, the Chinese research center will overtake the German one, and the group has decided to make China the focus of some business."

The company set up an R&D center in Shanghai with about 1,000 employees and an annual budget of about 4 percent of the company's sales in China.

The well-developed infrastructure in the coastal area, with its dense transportation network and supporting industrial facilities, has been a strong draw for global investors.

Alexander Wortberg, director of production at Qoros Automotive Co Ltd, said: "The eastern city of Changshu is well-situated with good communications facilities, and it's close to Shanghai and our customers. The city's economic development zone is a perfect place to set up a plant, because it has very good infrastructure and qualified young people.

"Last but not least, we found very supportive partners. We have a lot of suppliers here," Wortberg said.