“BEIJING—China is losing its competitive edge as a low-cost manufacturing base, new data suggest, with makers of everything from handbags to shirts to basic electronic components relocating to cheaper locales like Southeast Asia.
The shift—illustrated in weakened foreign investment in China—has pluses and minuses for an economy key to global growth. Beijing wants to shift to higher-value production and to see incomes rise. But a de-emphasis on manufacturing puts pressure on leaders to make sure jobs are created in other sectors to keep the world’s No. 2 economy humming.
Total foreign direct investment flowing into China fell 3.7% in 2012 to $111.72 billion, the Ministry of Commerce said Wednesday, the first annual decline since the fallout from the global financial crisis in 2009.
Then, a 13% fall in foreign investment into China reflected dire conditions for business in the U.S. and Europe, and global risk aversion, which choked off capital flows. Economists say the drop in 2012 is also partly cyclical, driven by slowing overall growth in China and Europe’s prolonged debt crisis.
But it also is the result of a long-term trend of rising wages and other costs that have made China less attractive, especially for basic manufacturing, economists say.
By contrast, foreign direct investment into Indonesia was up 27% in the first nine months of last year…..”
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