As a result of excess capacity, investment in real estate has fallen sharply in recent years. In Shanghai's business hub of Pudong, the glut of high-end property is likely to endure well into the next decade. Investors are attracted by the country's political stability and the fact that its banking system, while burdened by massive non-performing loans, continues to function. Such considerations have tended to outweigh the advantages offered by respective currency depreciations and sharply reduced asset prices in other, crisis-hit East Asian economies. Despite the relative strength of the renminbi, China's business environment remains highly competitive.
Wage levels are the second-lowest in East Asia after Indonesia.
Improved infrastructure has played a key role in attracting FDI to the country's economically underdeveloped hinterland, where costs are lower. Meanwhile, the government is set to maintain indefinitely the preferential tax status of the SEZs, where most FDI has traditionally been concentrated. Foreign investors' preference for WFOEs suggests that they are slowly gaining confidence in operating independently in China. Despite such attractions, the Chinese investment environment suffers from a series of considerable problems. In particular, China's underdeveloped and highly opaque legal system remains a key source a complaint by foreign investors, while the bureaucratic infrastructure is weak and inefficient.