Foreign Investment in China Falls Further

Foreign direct investment (FDI) in China continued to fall in September, the government said on Friday, owing to persistent weakness in the global economy and a slowdown in China. Investment from overseas declined by 6.8% from a year earlier to $8.43 billion last month, the Commerce Ministry said.

Foreign direct investment (FDI) in China continued to fall in September, the government said on Friday, owing to persistent weakness in the global economy and a slowdown in China.

Investment from overseas declined by 6.8% from a year earlier to $8.43 billion last month, the Commerce Ministry said.

The decline continued a downward trend stretching back to November, with the exception of May, when FDI eked out a marginal gain of .05%.

The government has blamed the slump on the slowdown in global economic growth, the prolonged European debt crisis and rising costs and weak demand at home.

For the first nine months of the year, foreign firms invested $83.4 billion in factories and other projects in China, down 3.8% from the same period a year ago, the ministry said.

Investment by the 27-member countries of the European Union fell 6.3% on year in the first nine months of the year to $4.83 billion, while that from the United States dipped .63% to $2.37 billion, the ministry said.

Capital flows from 10 Asian countries and regions including Hong Kong, Japan, the Philippines, Malaysia, Singapore and South Korea also tumbled by 4.9% year-on-year in the period to $71 billion, it added.

Ministry spokesman Shen Danyang said China is in an "adjustment stage" in terms of receiving foreign funds but that the government remains optimistic about the country's long-term appeal to overseas investors.

"We think the general trend of FDI development in the country remains positive and healthy," he told reporters at a briefing.

He added that there have been "positive changes" in the quality and structure of the use of foreign capital, such as a rise in fund flows into less developed central China.

Data on Thursday showed that the world's second-largest economy has slowed for seven consecutive quarters, expanding 7.4% in the three-month period ending on Sept. 30, its worst performance since the first quarter of 2009.

Exports, the key indicator of the health of China's vital manufacturing sector, rose 9.9% in September on year to a record monthly high, but analysts warned that the performance was unsustainable given the weak global outlook.

Shen downplayed hopes that the export sector has bottomed out.

"Currently the trade environment remains complicated and draconian and there are still many difficulties in expanding foreign demand, so that it is too early to come to the conclusion that China's foreign trade has recovered based on data for the single month," he said.

"The most key target for the full year at the moment is to try hard to maintain and improve our global market share."

Copyright Agence France-Presse, 2012

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