Metals News
FDI Climbs a Seventh Month
data analysis
Mar 16,2010

BEIJING, Mar. 16 -- China's foreign direct investment (FDI) rose for the seventh consecutive month in a row, albeit at a shade lower than earlier, the Ministry of Commerce (MOFCOM) said on Monday.

The indicator recorded year-on-year growth of 1.1 percent in February to $5.9 billion, the lowest since August 2009. FDI growth in January was 7.79 percent while in December last year it grew nearly 103 percent.

During the first two months of the year, FDI surged 4.86 percent to $14.02 billion, the ministry said.

Analysts said stringent government norms are acting as deterrents to FDI growth.

In sharp contrast, the nation's non-financial outbound direct investment (ODI) rose to $4.66 billion during the January-February period, outperforming the numbers for the first quarter of last year, the Ministry of Commerce said.

Preferential government policies and expectations of a yuan revaluation will further spur overseas investment and the ODI could quite possibly outpace the FDI this year, said analysts.

After declining for 10 consecutive months from October 2008, FDI rebounded in August last year.

"The slow pace in February sends signals that foreign investors want to wait and watch despite China's strong economic fundamentals," said Li Xiaogang, director of the Foreign Investment Research Center at the Shanghai Academy of Social Sciences.

"Things could change, however, when the yuan revaluation happens and FDI could see a sharp spurt," he said.

China has long been preferred as an attractive FDI destination due to its low labor costs and land rental fees. But such advantages are now diminishing and the nation is facing stiff competition from other Asian nations like Vietnam and India," Li said.

China's commitment to focus its growth on new sectors like clean energy has acted as a dampener to foreign investment in sectors like manufacturing.

In his recent annual government work report, Premier Wen Jiabao stressed that China will look to attract more investment from sectors like high-end manufacturing, high-tech, services, new energy and energy saving industries.

According to the Ministry of Commerce, during the January-February period, investment in manufacturing fell by 13.02 percent from a year earlier, but investment in sectors like agriculture, forestry and fisheries surged 81.88 percent, while services saw growth of 18.94 percent.

"We should not take these figures too seriously. From an annual perspective, China is still attractive for foreign investors and the FDI will grow over last year," said Yan Jinny, an analyst with Standard Chartered in Shanghai.

In 2009, China's FDI decreased by 2.6 percent to $90.03 billion.

Between January and February, China's investors injected around $4.66 billion into 89 nations and regions worldwide.

China's non-financial ODI grew by 6.5 percent to $43.3 billion in 2009, prompting MOFCOM officials to put the figures for the whole year at around $50 to 60 billion.


China economy macroeconomy
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