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FDI drops 3% amid slowdown

By Li Jiabao  (China Daily)

08:07, July 18, 2012

Foreign direct investment in China dropped 3 percent year-on-year to $59.1 billion in the first half of this year amid the country's economic slowdown and the slow recovery of the global economy.

FDI registered $12 billion in June, down 6.9 percent from the previous year, according to the Ministry of Commerce. The decline is the largest drop since December and compares with a 0.05 percent gain in May after a six-month slide.

"Despite the decline in the first half of this year, we hold that the whole year will see a steady expansion of FDI into China," Shen Danyang, spokesman for the ministry, told a news briefing on Tuesday.

"As the Chinese government take steps to stabilize economic growth and boost domestic consumption, the economic expansion will pick up in the second half of this year. This will boost the confidence of foreign investors and increase their investments in China," Shen said.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank of the ministry, said: "If there were no stimulus measures, FDI flowing into China would not grow significantly this year. The growth would be between 3 percent and 5 percent from the previous year."

He said this year is a very challenging one for China to attract FDI because the European Union is troubled by its debt crisis while the United States is struggling with its own recovery, and the emerging economies saw slower economic growth.

"China needs to take timely measures to enlarge FDI inflow because steady growth of FDI relates to China's stable trade growth and economic expansion, as well as employment."

Huo suggested the eastern region further open up its service sector to attract FDI.

"China can also invite foreign investment into its strategic industries and high-tech industry, and encourage foreign investment in the research and development areas of these industries after a clear definition of the fields open to foreign investment."

Zhang Yansheng, secretary-general of the academic committee of the National Development and Reform Commission, agreed, saying, "China's FDI will not grow fast this year because it has entered a slow expansion era since 2005."

China retained its position as the most attractive economy to multinational corporations in 2012, followed by the US and India, according to an annual survey of world investment prospects by the United Nations Conference on Trade and Development.

"This shows that multinational companies still have great confidence in China's development," Shen added.

Commerce Minister Chen Deming told foreign investors during a meeting on Friday that China will keep supporting the development of foreign enterprises in China while encouraging foreign investment in research and development as well as innovation.

"The huge domestic consumption market, which is expanding fast, provided great opportunities for foreign investors," Shen said.

The government has established a long-term mechanism to crack down on infringement of intellectual property rights, a move to improve the investment environment.

In the next step, the ministry will further open up the service sector and encourage foreign investment in emerging industries, modern agriculture and services, as well as energy conservation and environment protection. These measures will improve the country's use of foreign investments, Shen said.

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