Wed, Jul 18, 2012 - Page 15 News List

Foreign investment in China slides

LOSS OF CONFIDENCE:Despite mild improvements to inward capital flow by EU countries, the world’s second-largest economy shows signs of a marked deceleration

AFP, BEIJING

A worker monitors a thread-making machine at a factory in Jinjiang in China’s Fujian Province on Thursday. Foreign direct investment in China has fallen over the past six months, while the country’s economy grew at its slowest pace in three years.

Photo: AFP

Foreign direct investment (FDI) in China fell by 3 percent in the first half of the year as the global economy slowed, the commerce ministry said yesterday.

Overseas companies invested US$59.1 billion in factories and other projects in China from January to last month — well below the US$60.89 billion spent in the same period last year — ministry spokesman Shen Danyang (沈丹陽) said.

“The pace of the world economic recovery remained slow and many uncertainties persisted. In particular, the EU debt crisis has yet to be resolved,” Shen told reporters.

Increased Chinese production costs and a tightening in property policy had also contributed to the decline in first-half FDI, he added. China’s inflation rate hit 6.5 percent in July last year, but has since slowed.

The world’s second-largest economy grew 7.6 percent year-on- year from April to last month, the slowest pace in more than three years as dire problems overseas started to hit home, according to official data released on Friday.

Last month alone China’s FDI fell by 6.9 percent year-on-year to US$12 billion, despite a slight rebound in investment from the debt-ridden EU.

EU countries invested a total of US$3.52 billion in China in the first half, up 1.6 percent on the same period last year, compared with a 5.1 percent fall in the first five months of the year, but investment from 10 Asian nations and territories including Hong Kong, Macau, Japan and the Philippines was down 2.8 percent year-on-year at US$51.07 billion, while US investment fell 3.2 percent to US$1.63 billion.

However, Shen said the government expected FDI to increase steadily for the full year as the effects of China’s policies to bolster economic growth and increase domestic demand kicked in.

“This will boost the confidence of foreign investors in China and help them speed up the pace of their decision-making,” he said.

The government this month took the rare step of cutting back interest rates for the second time since early last month. That came after three cuts since December last year in banks’ reserve requirements, or the amount of money that lenders are obliged to keep on hand.

Such cuts are meant to free up funds for lending in order to boost the economy.

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