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Foreign investment falls amid global uncertainty

By Wang Yanlin (Shanghai Daily)

08:13, December 19, 2012

FOREIGN direct investment in China fell 5.4 percent from a year earlier in November, widening from October's drop of 0.24 percent, the Ministry of Commerce said yesterday.

The total value of overseas investment stood at US$8.29 billion, the sixth consecutive month of year-on-year decline.

In the first 11 months, foreign investors channeled a total of US$100 billion into China, down 3.6 percent on an annual basis.

"Global businesses are still cautious about investment decisions when the economic outlook for next year remains murky," said Li Maoyu, an analyst at Changjiang Securities Co. "China is just one of the many countries reporting less foreign investment in a bad global economic climate."

Commenting on media reports that China's ability to attract foreign investment would continue to weaken in 2013, Shen Danyang, a ministry spokesman, said he expected stable growth next year.

"It is because China's economic fundamentals remain healthy with a mild recovery under way," Shen said. "Our labor costs, though increasing, are still comparatively low compared with many other markets, and are better quality."

In addition, Shen said, many businesses treated China as a strategic market, and increasingly counted on the country to offset the slowdown in developed markets and the global fallout from Europe's credit crisis.

China surpassed the United States in the first half of this year to become the world's largest market for foreign direct investment, indicating foreign investors' confidence in China was still strong.

But Shen acknowledged that there were challenges ahead due to the still weak global economy, a trend of more diversification in investment destinations, some overseas media reports portraying a deteriorating investment environment in China, and increasing production costs. "The ministry will map out some targeted policies to stabilize the scale of foreign investment while improving its quality," Shen said.

In the first 11 months, China's manufacturing sector absorbed US$43.9 billion of foreign investment, contracting 7.1 percent annually, yesterday's data showed.

Funds flowing into the service sector fell 2.5 percent to US$47.5 billion, led by an 8.3 percent cut in investment in the property market. Excluding real estate, investment in the service sector grew 2.8 percent.

Capital from the 27-member European Union fell 2.9 percent during the January-November period, but investment from Germany, the Netherlands and Switzerland bucked the trend with 25.8 percent, 49.5 percent and 58.5 percent increases respectively.

Investment from Japan rose 11.3 percent to US$6.6 billion, and the US raised its investment to US$2.9 billion, up 6.3 percent.

China's non-financial outbound direct investment climbed 25 percent to US$62.5 billion in the first 11 months as domestic investors pumped money into 3,596 overseas companies in 130 countries and regions.

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