China FDI flow slows down for third month in Aug on global crisis

Foreign direct investment (FDI) into China fell for the third consecutive month in August due to continuing global economic crisis, Chinese Commerce Ministry said.

The FDI the country drew last month dropped 1.43 percent from a year earlier to $8.33 billion, the Ministry's spokesman Shen Danyang said. China, thus, has received $74.99 billion in the first eight months of this year, which is down by 3.4 percent year-on-year, said Shen.

Investments from the debt-plagued European Union (EU) dropped 4.1 percent year-on-year in the January-August period and that from the US was down 2.85 percent. In the first seven months of the year, investment from the EU, China's largest trade partner, dropped 2.7 percent from a year ago.

Reuters

But the investment from Japan rose 16.2 percent from a year earlier, he said, adding that this compares to a 50 percent increase in 2011.

But this was before the present crisis between the two countries over the disputed islands due to which many Japanese business in China were shut down as some of them came under attack.

Shen said the drop in investment from the United States was due to a lack of major projects in recent months and the trend may reverse at the end of the year.

Last month he attributed the dwindling investment inflows to both international and domestic economic factors, including the euro-zone's ongoing debt crisis, the US strategy of 'bringing manufacturing back home', China's strained land supplies and rising labour costs.

China approved the establishment of 754,130 foreign-funded companies in the first eight months, Shen said. He noted that FDI into the service industry, excluding the real estate sector, rose 5.31 percent year-on-year. Boosted by growing domestic consumption, the retail sector rose 9.76 percent, he added.

Investment in the real estate sector was effectively controlled, falling 9.89 percent in the January-August period compared with a year ago. China has been striving to curb speculation in the real estate market in an effort to bring soaring home prices back to reasonable levels.

Premier Wen Jiabao has said the country will stick to its property tightening measures despite slowing economic growth. The FDI data came after an array of other economic indicators for August were released, including the inflation rate, bank lending, exports and industrial output, which signalled mounting downward pressure on the national economy.

China's economy expanded at its lowest pace in more than three years in the second quarter, rising 7.6 percent from a year earlier. The country's equity market gained at mid-day, with the key Shanghai index up 0.17 percent.

PTI