Tags: China | Foreign | Direct | Investment

China's Foreign Direct Investment Falls 3%, Full-Year Growth Seen Steady

Monday, 16 July 2012 07:04 AM EDT

China's foreign direct investment inflows fell 3 percent in the first half of 2012 from a year earlier, with inflows falling for six consecutive months, as concerns over Europe's debt crisis and a slowdown in China's economy dampened investment appetite.

Wang Chao, a vice commerce minister, said on Monday that the country drew about $59.1 billion in foreign direct investment (FDI) between January and June, the official Xinhua news agency reported.

Based on previously announced figures, that implies FDI in June alone came to around $12 billion, a drop of about 7 percent from the same month a year earlier.

The commerce ministry is due to formally release the FDI figures on Tuesday.

Despite the slowing inflows over the first half, Wang was optimistic about the outlook for the full year, saying that foreign investment in China this year would be flat or slightly up from last year.

"The scale of foreign direct investment is expected to keep steady this year," he told an investment policy seminar in Hong Kong, according to the Xinhua report.

"As the central government has unveiled a slew of measures to boost domestic consumption and the economy, the trend for the economy to stabilize is being further consolidated, which could help revive confidence of global investors," Wang said.

China is also relaxing dividend withholding tax rules for foreign firms operating in the mainland, which could save companies billions of dollars and make the country a more attractive place to do business, a tax expert said on Monday.

The FDI data follows a raft of other economic indicators for June, which showed fast-easing consumer prices, outright deflation in producer prices and weak import growth, thanks to shrinking demand at home and abroad.

China's economy slowed for a sixth successive quarter in the second quarter to 7.6 percent, its slackest pace in more than three years, dragging down growth in the first half of year to 7.8 percent.

FDI is an important gauge of the health of the external economy, to which China's vast factory sector is oriented.

But FDI is a small contributor to overall capital flows compared with exports, which were worth about $1.9 trillion in 2011.

China has unveiled a slew of new measures to bolster its economy, including fast-tracking investment approvals, providing consumption incentives in some household sectors and pushing ahead with financial reforms.

China drew a record $116 billion in foreign direct investment in 2011. The commerce ministry aims to attract an average of $120 billion in each of the next four years.

© 2024 Thomson/Reuters. All rights reserved.

Monday, 16 July 2012 07:04 AM
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