March FDI in China falls 1.47% year-on-year

China Daily (Canada) - - BUSINESS - By ZHENG YANGPENG zhengyang­peng@chi­

For­eign di­rect in­vest­ment in China fell in March, the first year-on-year con­trac­tion since Jan­uary 2013, but of­fi­cials and ex­perts said monthly fluc­tu­a­tions do not re­flect long-term trends.

Ac­cord­ing to the Min­istry of Com­merce’s data on Thurs­day, FDI in China dipped 1.47 per­cent in March from a year ear­lier to $12.24 bil­lion. The drop dragged FDI growth in the first quar­ter to 5.5 per­cent, amount­ing to $31.55 bil­lion. By com­par­i­son, FDI grew 10.44 per­cent in the first two months.

“It is nor­mal for in­vest­ments to have some monthly fluc­tu­a­tions,” said Shen Danyang, a min­istry spokesman.

“Many fac­tors, such as a sin­gle big-ticket in­vest­ment deal, a chang­ing macroe­co­nomic en­vi­ron­ment and the fluc­tu­a­tion of the ren­minbi ex­change rate could all af­fect the fig­ures. We are con­fi­dent about the steady growth in FDI for the whole year. We, along with many other re­search in­sti­tutes and for­eign cham­bers of com­merce, think China re­mains an im­por­tant des­ti­na­tion for for­eign in­vest­ment. Multi­na­tion­als re­main up­beat about our in­vest­ment en­vi­ron­ment.”

A close look at the first-quar­ter FDI fig­ures showed in­vest­ment from ma­jor de­vel­oped economies fell, while that from emerg­ing economies held steady.

In­vest­ment from Ja­pan plunged 47.2 per­cent to $1.21 bil­lion in the quar­ter, while in­vest­ment from the Euro­pean Union slid 24.5 per­cent to $1.55 bil­lion. In­vest­ment from the US was down 1.9 per­cent at $1.04 bil­lion while that from mem­bers of the As­so­ci­a­tion of South­east Asian Na­tions rose 7.84 per­cent to $1.97 bil­lion.

Com­ment­ing on the ma­jor con­trac­tion in­EUFDI, MeiXinyu, an ex­pert at the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion, a think tank un­der the Com­merce Min­istry, said Euro­pean com­pa­nies’ con­fi­dence was un­der­mined by a long-pe­riod of low growth. China’s re­duced ap­petite for lux­ury items may be an­other ma­jor rea­son for Euro­pean com­pa­nies to scale back their de­ploy­ment in the mar­ket.

Ris­ing un­cer­tainty caused by ten­sion be­tween Ja­pan and China, along with Ja­panese firms’ weak­en­ing com­pet­i­tive­ness in the global con­text, ex­plained Ja­pan’s tum­bling in­vest­ment in China, saidMei.

De­spite slow­ing growth in the first quar­ter, the ser­vice sec­tor was a rare bright spot.

The sec­tor

at­tracted $17.39


of for­eign in­vest­ment, up 20.55 per­cent over the same pe­riod a year ear­lier.

In­vest­ment in the sec­tor con­trib­uted 55.13 per­cent of the to­tal FDI in the pe­riod. In­vest­ment in the man­u­fac­tur­ing sec­tor slipped 11.7 per­cent.

An­a­lysts said the bet­ter po­si­tion of the ser­vice sec­tor dove­tailed with its grow­ing role in the econ­omy, while China’s plan to fur­ther open up do­mes­tic ser­vice in­dus­tries to for­eign in­vest­ment could boost FDI in the sec­tor.

The share of ter­tiary in­dus­try (mainly ser­vice in­dus­tries) in the econ­omy rose to 49 per­cent, com­pared with 44.9 per­cent for the sec­ondary in­dus­try, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics.

Mean­while, China’s out­bound di­rect in­vest­ment by non-fi­nan­cial firms dropped 16.5 per­cent to $19.9 bil­lion in the first quar­ter, the Min­istry of Com­merce re­ported.

The min­istry had pre­vi­ously said a $15 bil­lion ac­qui­si­tion by oil and gas pro­ducer CNOOC in early 2013 was the rea­son for the sharp drop.

An­a­lysts ex­pect the re­cent de­ci­sion by the Na­tional De­vel­op­ment and Re­form Com­mis­sion to ease re­stric­tions on over­seas in­vest­ments could spur vi­tal­ity for ODI. Start­ing from May 8, deals less than $1 bil­lion can pro­ceed with­out of­fi­cial ap­proval.

Un­der cur­rent reg­u­la­tions, out­bound in­vest­ment in re­sources has to be ap­proved by the com­mis­sion if its value ex­ceeds $300 mil­lion while in­vest­ment in the non-re­sources sec­tor is sub­ject to ap­proval if its value ex­ceeds $100 mil­lion.

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