Third straight month of decline prompts ministry warning

BEIJING / BRUSSELS - Foreign direct investment dropped for the third straight month in January as European investment plunged by 42 percent from a year earlier.

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The slump in European investment was instrumental in causing a slight fall of 0.3 percent in FDI.

The drop prompted a warning from the Ministry of Commerce over the "grim" outlook for FDI.

But the ministry stressed that, long term, China remains an attractive investment destination.

FDI from the 27 European Union nations shrank 42.5 percent year-on-year to $452 million last month, the ministry said on Thursday.

Ministry spokesman Shen Danyang attributed the sharp drop in investment from the EU to "the spreading debt crisis" and the weakening economy resulting in reluctance to invest overseas.

In 2011, FDI from the EU dropped by 3.7 percent to $6.35 billion.

Zhang Haiyan, program director at the Euro-China Centre of the Antwerp Management School, said the drop needs attention. "European companies are cautious regarding capital flow because of the ongoing crisis," Zhang said.