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Tags: China | Foreign | Direct | Investment

Foreign Direct Investment in China Declines for Fifth Month

Tuesday, 17 April 2012 07:18 AM EDT

Foreign direct investment in China dropped for a fifth straight month in March on a slowing economy, limited prospects for gains in the yuan and renewed concerns that Europe’s debt crisis will worsen.

Inbound investment fell 6.1 percent from a year earlier to $11.76 billion, the Ministry of Commerce said today in Beijing, after a 0.9 percent decline the previous month and a 32.9 percent jump in March last year.

China’s economy expanded the least in almost three years in the first quarter and a widening of the yuan’s trading band this week signals that the government may tolerate more two-way moves in the currency against the dollar. Spending in China by European Union companies slumped by a third in the first two months of the year while U.S. investment rose less than 1 percent, according to ministry data.

“Investment growth is likely to slow as foreign investors are less upbeat on the outlook for China’s economy,” Dariusz Kowalczyk, a Hong Kong-based strategist with Credit Agricole CIB, said before the release. “It implies a more balanced external position since there are less foreign inflows and thus less upward pressure on the exchange rate.”

FDI may grow about 6 percent this year to $123 billion after a 9.7 percent gain in 2011, Kowalczyk said.

Slower Expansion

Foreign investment in the first quarter fell 2.8 percent from a year earlier to $29.48 billion, the ministry said, after a 29.4 percent increase in the same period a year earlier. Investment in 2011 rose to a record $116 billion.

The three analysts in a Bloomberg News survey all estimated a decline in March FDI ranging from 2.1 percent to 20 percent.

China expanded 8.1 percent in the first quarter from a year earlier, the government said last week. While that’s the slowest pace in almost three years, the economy will still grow in 2012 at more than double the pace for the world as a whole and more than four times the pace of the U.S., according to International Monetary Fund estimates in January.

Ford Motor Co. and Honda Motor Co. said this month they plan to expand to tap growing demand in China, the world’s biggest auto market. The U.S. carmaker announced an investment of about $600 million to increase capacity at one of its passenger-car factories while the Japanese company said it will add more models and may set up a research center.

© Copyright 2023 Bloomberg News. All rights reserved.

Tuesday, 17 April 2012 07:18 AM
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