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Foreign investment in China in first fall for three years

The fall comes amid economic turmoil in developed markets and a slowdown in the country.

A Chinese national flag is reflected on a fashion poster at a shopping mall in Beijing, China
A Chinese national flag is reflected on a fashion poster at a shopping mall in Beijing, China
Image: Vincent Yu/AP/Press Association Images

FOREIGN DIRECT INVESTMENT in China declined for the first time in three years in 2012, official data showed today, amid economic turmoil in developed markets and a slowdown at home.

But Chinese direct investment overseas surged almost 30 per cent from the previous year, with analysts saying that firms were increasingly looking to expand abroad as space for growth in China shrank.

FDI, which excludes financial sectors, into China declined 3.7 percent to $111.72 billion last year from 2011, the commerce ministry announced.

It slipped from an all-time high of $116 billion recorded in 2011 and was the first year-on-year decrease since 2009, according to previous figures.

Ministry spokesman Shen Danyang said, meanwhile, that in 2012, Chinese directly invested $77.22 billion overseas in non-financial sectors in 141 countries and regions, an increase of 28.6 per cent from the year before.

Overseas investment

Overseas investment is set to exceed inbound FDI in coming years as Chinese firms expand abroad due to overcapacity and limited room for growth at home, and as foreign companies cut back in China due to rising costs, an analyst said.

The investment figures come after China’s economy slowed throughout most of 2012, while developed economies such as the United States, the European Union and Japan largely remained weak.

For the month of December FDI into China also fell, slipping 4.5 per cent from the same month in 2011 to $11.7 billion, the commerce ministry said.

Economic growth in China has declined for seven straight quarters through the three months ended September, though recent positive signs have led economists to expect a rebound in the fourth quarter and this year.

Forecasts

GDP growth figures for the fourth quarter and all of 2012 are scheduled to be released on Friday.

The median forecasts in surveys of economists by AFP are for growth of 7.8 per cent in the fourth quarter and 7.7 per cent in 2012. Economists polled also expect the economy to grow 8 percent in 2013.

The lion’s share of FDI into China comes from 10 Asian countries and economies including Japan, Taiwan and Hong Kong. That figure declined 4.8 percent last year to $95.74 billion, the ministry said.

Investment from the European Union fell 3.8 per cent to $6.11 billion, the ministry said. But investment from the United States and Japan increased.

Inflows from the US gained 4.5 percent to $3.12 billion, while those from Japan increased 16.3 per cent to $7.38 billion.

The ministry said in a statement:

The growth momentum of investment from some developed countries including the United States and Japan was good.

However, growth of investment from Japan last year slowed from the 33.2 percent gain recorded in 2011 amid a spiralling dispute between Beijing and Tokyo over uninhabited islands in the East China Sea.

Shen, the ministry spokesman, downplayed the overall decline in FDI, saying a study by the ministry did not find foreign investment leaving the country on a large scale.

“We still actively encourage foreign investment”, he said, adding that China has been the largest foreign investment host nation among developing countries for 20 consecutive years. In 2013, the ministry will:

keep fundamental policies on foreign investment stable and the overall size of FDI stable.

- © AFP, 2012

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