Fourth straight monthly fall in FDI

Updated: 2012-03-16 09:09

By Ding Qingfen (China Daily)

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Foreign direct investment (FDI) shrank in February from a year earlier, the fourth straight fall, while investment from Europe witnessed a sharp decline, according to the Ministry of Commerce.

Experts were not optimistic about the inflow of foreign investment into China as the European debt crisis continues and domestic economic growth slows down.

FDI last month dropped by 0.9 percent year-on-year to $7.73 billion, following a 0.3 percent drop in January.

"This is not good news, it reflects the gloomy global economy," said Wang Zhile, director of the research center for transnational cooperation at the ministry.

It is difficult to be optimistic about the outlook for FDI "given the doubts in the minds of foreign companies about the global economy and China's foreign investment environment," he said.

The first two months of the year have seen investment into China from the 27 EU nations drop by 33.32 percent, from the previous year, to $906 million.

"It's hard to tell whether investment from the region will continue to drop sharply," ministry spokesman Shen Danyang said.

But it is difficult to be optimistic "as global investors are too prudent and unwilling to spend money", Shen said.

German Finance Minister Wolfgang Schaeuble and his French counterpart Francois Baroin said on Tuesday that the worst of the eurozone crisis appeared to be over, but they warned member states that they will have to continue reform.

Outflows from the Asia-Pacific region and the United States are positive. From January to February, investment from 10 Asian nations and regions, including Japan, the Republic of Korea and Singapore, increased by 2.66 percent year-on-year to $15.38 billion, and from the US rose by 0.87 percent to $525 million.

The US Federal Reserve recently slightly upgraded its outlook, expecting "moderate" growth over coming quarters and a gradual decline in the unemployment rate.

Surveys by the chambers of commerce from Japan, the US and the EU, all showed that a majority of companies are confident in Chinese markets and would like to further invest here. But there are criticisms, especially concerning laws and regulations, market access and rising labor costs.

"China needs further opening-up, otherwise, foreign companies will move to somewhere else," said Xia Youfu, a senior professor researching the openness of the Chinese economy with the University of International Business and Economics.

Robust growth cannot last forever, Wang said.

"China has witnessed rapid growth (in FDI) for a few decades. We cannot expect robust growth to be sustained over a long period."

In the new industrial guidelines for foreign investors, China said it encourages foreign companies to invest in high-end manufacturing, services, high-tech and strategic emerging sectors.

Citigroup said recently it plans to double its branches in China to 100 in the next two to three years.

China's outbound direct investment (ODI) in January and February, in the non-financial sector, surged by 41.1 percent from a year earlier to $7.44 billion, according to the ministry. They did not disclose details.

China's ODI in 2011 into the European Union rose by 94 percent and increased in Africa by 59 percent from a year earlier.

China Investment Corp, the sovereign wealth fund which recently received an injection of $30 billion from the government, will mainly focus on investing in Europe in the short term, while financial assets are undervalued and there are limited financial risks in purchasing, Wang Jianxi, deputy general manager and chief risk officer of the company, told China Daily.