China FDI Falls For the Sixth Consecutive Month
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In the latest sign of trouble for the world’s second largest economy, foreign direct investment into China fell 0.7 percent in April – the longest stretch of decline since the start of the global financial crisis.
China’s Ministry of Commerce announced yesterday that April’s inbound investment dropped 0.7 percent from a year earlier to $8.4 billion, following a 6.1 percent decline in March. FDI fell 2.4 percent in the first four months, from a year earlier, to $37.9 billion while outbound direct investment grew by 72.8 percent to $23.2 billion.
In the latest sign of trouble for the world’s second largest economy, foreign direct investment into China fell 0.7 percent in April – the longest stretch of decline since the start of the global financial crisis.
China’s Ministry of Commerce announced yesterday that April’s inbound investment dropped 0.7 percent from a year earlier to $8.4 billion, following a 6.1 percent decline in March. FDI fell 2.4 percent in the first four months, from a year earlier, to $37.9 billion while outbound direct investment grew by 72.8 percent to $23.2 billion.
Speaking at a press briefing, spokesperson for the Ministry of Commerce, Shen Danyang said that the figures were “worse than expected”, with the decline underscoring the greater risk of a slowdown in China.
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Investment from the European Union, the epicentre of the sovereign debt crisis and an important economic partner for China, tumbled 27.9 percent on year to $1.9 billion in from January to April.
Shen added the “sluggish” global economy and rising costs in China were to blame for the negative data.
He told the Chinese media:
[quote] The continual negative growth of China’s FDI has to do with factors at home and abroad. Globally, the growth of the world economy is weak on the whole, greatly affecting global direct investment. Domestically, costs are increasing and that weakens our operating cost advantage. [/quote]
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However, Shen said he is still confident in the long-term FDI outlook, dismissing the data as a “temporary” decline.
Tuesday’s figures showed investment from the United States rising 1.9 percent in the first four months to reach $1.05 billion, while FDI from Japan rose 16 percent to $2.7 billion in the same period.
According to Shen, China is increasingly discerning of the type of investment it wants to attract.
He said:
[quote] We remain confident about attracting foreign investment as the business environment in China is getting better and better. China is now entering a period where we choose the foreign investment. [/quote]
Speaking to the Wall Street Journal, HSBC economist Ma Xiaoping said the decline in FDI is unlikely to have a huge direct impact on China’s real economy, though it signals that investors have become cautious about China’s prospects.
With inflows declining, the Chinese central bank now has more room for looser monetary policies. Over the weekend, the People’s Bank of China slashed banking reserve requirements – the third cut in six months.
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