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People's Daily Online>>China Business

FDI in China falls for fifth straight month

By Song Shengxia (Global Times)

08:05, April 18, 2012

Foreign direct investment (FDI) in China fell for a fifth straight month in March, as companies curbed investments amid a sluggish global economy, the Ministry of Commerce (MOFCOM) announced yesterday.

FDI in March dropped 6.1 percent from a year earlier to $11.76 billion, data from the ministry showed.

This is the fifth straight monthly drop and the longest run of decline since the global financial crisis when China saw its FDI fall for nine consecutive months between November 2008 and July 2009.

For the first quarter, the inbound investment dropped 2.8 percent from a year earlier to $29.48 billion, data showed.

"Investment from the EU saw a significant drop in the first quarter, falling 31.3 percent, affected by the region's debt crisis," ministry spokesman Shen Danyang said at a press conference.

The country's property curbs also had an impact on FDI inflows as the investment in the real estate sector accounted for one-fourth of the total FDI in recent years, Shen said.

However, the spokesman said the investment decline was in line with the government's macroeconomic policies.

"As for the outlook for this year, we believe the situation will be quite grim. There is still no resolution to the European debt crisis, and European companies' ability to invest abroad has diminished," he said.

"The continued FDI decline shows that foreign investors' concerns over China's slowing economy have not eased," Zhong Zhengsheng, an analyst at the Everbright Securities, said yesterday.

"Hot money, which takes a form of FDI, is flowing out as the expectations of the yuan appreciation waned," Lu Zhengwei, an economist with Industrial Bank, told the Global Times yesterday.

"Foreign capital investment in China's industries has also dropped due to rising labor costs. Such a trend won't be reversed in the short term. So the decline in FDI has not bottomed out and may persist for some time," Lu said.

Meanwhile, China's outbound investment is reported to be surging.

Outbound FDI rose 94.5 percent year-on-year in the first quarter to reach $16.55 billion, the ministry's data showed.

Of the total, $6.2 billion of investment went into mergers and acquisitions, spokesman Shen said.

"Given a stronger yuan and the government's policy to encourage domestic companies to go global, outbound FDI will continue to rise and may surpass the gains in FDI inflows, so the net inflows will fall," said Lu from the Industrial Bank yesterday.

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