Foreign direct investment (FDI) in China faces “unprecedented difficulties” after falling for eight months, the longest stretch of declines this decade, Chinese Vice Commerce Minister Chen Jian (陳健) said.
The government will announce policies to stabilize investment “soon,” Chen said at a briefing in Beijing yesterday.
Multinationals have reduced spending as they grapple with the global crisis, adding to drags on growth in the world’s third-biggest economy after exports collapsed.
Direct investment in China slid 17.8 percent to US$6.38 billion in May from a year earlier. The latest data also showed that China received US$34.05 billion in foreign investment in the first five months of the year, down 20.4 percent from the same period a year ago.
Chen said the planned policies to stabilize foreign investment would focus on projects that would help create jobs, save energy and protect the environment.
“We will continue to work on the creation of a stable and transparent policy environment, level and open market conditions, and regulated and efficient administrative services for foreign investment,” he said.
Chen said Beijing may allow foreign firms with investments in China to list domestically, as part of efforts to boost trader confidence during the global downturn.
“We will continue to actively work with relevant authorities to study and complete the policy of allowing foreign-invested companies to list in the country,” he said. “We will guide high-quality foreign-invested companies to carry out domestic listings at appropriate times,” he said.
However, Chen said there would be no change to an order announced last month stating domestic firms should be prioritized in bids for projects that are part of a US$585 billion stimulus package unveiled last year.
“The problem now is not that we are protecting [Chinese companies], but that there are signs that domestic products are discriminated against. We just want an impartial environment,” he said.
Foreign-invested businesses account for 30 percent of industrial output, 55 percent of trade and 11 percent of urban jobs, the commerce ministry said.
Foreign direct investment in China totaled US$876 billion at the end of last year, while China invested US$170 billion overseas, a report by the Peterson Institute for International Economics said.
Last year, the nation attracted a record US$92.4 billion, excluding the financial sector.
China’s direct investment abroad also fell in the first half of this year, the official said, adding that the government would use fiscal, financial, foreign-exchange and insurance polices to encourage larger outbound flows.