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People's Daily Online>>China Business

Cautious end to a record year for foreign investors

By Wang Yanlin (Shanghai Daily)

15:37, January 19, 2012

FOREIGN direct investment in China rose 9.7 percent in 2011 from a year earlier to a record US$116 billion, though it fell for a second month in December, the Ministry of Commerce said yesterday.

December saw a total of US$12.2 billion from overseas investors, a fall of 12.7 percent compared to the previous year. In November the decrease was 9.7 percent.

There was a marked decline in investment from the United States and the eurozone. Last year, the US channeled US$2.9 billion non-financial direct investment to China, 26 percent less than a year earlier.

Capital from the 27-member European Union also lost 3.6 percent to US$6.3 billion.

Shen Danyang, a ministry spokesman, said China had developed more sources of foreign investment.

"The FDI growth rate was not particularly high in recent years, it was mainly because of corrections in the world economy that made global investors very cautious," Shen said. "But we believe China remains one of the most attractive destinations for foreign investment because of its stable economic and political environment."

Foreign investment from emerging markets picked up quickly and investors in Asia are becoming a major source for China's FDI growth with an increase of 13.9 percent last year.

China's service industry attracted US$55.2 billion foreign investment last year, or 47.6 percent of the total FDI. It was the first time foreign direct investment in the service industry surpassed the amount flowing into the country's manufacturing sector.

China updated its guidelines for foreign investors last month to outline sectors where investment is encouraged, restricted or banned.

Under the new rules, China allows foreign investment in hospitals and financial leasing firms, but doesn't welcome foreign-funded automobile factories or polysilicon plants.

Meanwhile, China's outbound non-financial direct investment rose 1.8 percent year on year to US$60 billion in 2011, slower than the pace of 5.2 percent in the first 11 months.

"The outbound FDI growth last year was also not substantial because of gloomy global economic conditions," Shen said, adding that some countries had put restrictive policies in place for foreign investment.

China's investment in Europe and Africa surged last year, however. Investment in Africa grew more than 50 percent while that in the European Union nearly doubled, the ministry said.

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