China’s FDI inflow falls for third month

17  January 2013

BEIJING — Foreign direct investment into China fell for the third consecutive month in August as global economic woes continued to weigh heavily.

The FDI the country drew last month dropped 1.43 percent from a year earlier to $8.33 billion, the Ministry of Commerce announced.

This brought the total FDI inflow for the first eight months of 2012 to $74.99 billion, down 3.4 percent year on year, said ministry spokesman Shen Danyang.

Investment from the debt-plagued European Union dropped 4.1 percent year on year in the January-August period and that from the United States was down 2.85 percent, according to Shen.

In the first seven months of the year, investment from the EU, China’s largest trade partner, dropped 2.7 percent from a year ago.

Investment from Japan rose 16.2 percent from a year earlier, he said, adding this compares to a 50-percent increase in 2011.

Shen said the drop in investment from the United States was due to a lack of major projects in recent months and the trend may reverse at the end of the year.

The spokesman last month attributed the dwindling investment inflows to both international and domestic economic factors, including the eurozone’s ongoing debt crisis, the United States’ strategy of bringing manufacturing back home, China’s strained land supplies and rising labor costs.

China approved the establishment of 754,130 foreign-funded companies in the first eight months, he said.

Shen noted FDI into the service industry, excluding the real estate sector, rose 5.31 percent year on year. Boosted by growing domestic consumption, the retail sector rose 9.76 percent, he added.

Investment in the real estate sector was effectively controlled, falling 9.89 percent in the January-August period compared with a year ago.

China has been striving to curb speculation in the real estate market in an effort to bring soaring home prices back to reasonable levels.

Premier Wen Jiabao has said the country will stick to its property tightening measures despite slowing economic growth.

The FDI data came after an array of other economic indicators for August were released, including the inflation rate, bank lending, exports and industrial output, which signaled mounting downward pressure on the national economy.

China’s economy expanded at its lowest pace in more than three years in the second quarter, rising 7.6 percent from a year earlier.

The country’s equity market gained at midday on Wednesday, with the key Shanghai index up 0.17 percent to end at 2,063.07.