Falling FDI blamed on Lunar New Year

PUBLISHED : Wednesday, 16 March, 2005, 12:00am
UPDATED : Wednesday, 16 March, 2005, 12:00am

The flow of foreign direct investment (FDI) into the mainland fell last month from the same month last year, the Ministry of Commerce reports.

But the decline was likely due to the timing of the Lunar New Year. In the first two months of this year, actual direct foreign investment rose 8.2 per cent year-on-year to nearly US$8 billion.

Actual foreign direct investment was US$3.9 billion in February, down about 7 per cent from a year earlier, the ministry said.

Contracted foreign investment, an indication of future actual investment flows, was US$7.3 billion in February, a fall of 18 per cent year on year.

In the first two months of this year, contracted foreign investment was US$20.1 billion, up 6.2 per cent, the ministry said.

The ministry also said 5,444 foreign-funded investment projects had been approved in the first two months of the year, a drop of more than 9 per cent compared with the same period last year.

Experts said seasonal factors were the likely cause of last month's decline, as the Lunar New Year holiday fell in February this year and in January last year.

However, further observation would be needed because of changing domestic and foreign economic conditions. Zuo Liancun , of the Guangzhou-based University of Economics and Foreign Trade, said the week-long holiday had delayed the approval of many foreign direct investment projects.

'Just in regard to the reduced number of working days in February this year in comparison to last year, it is understandable that fewer [foreign direct investment] projects got through approval procedures,' Professor Zuo said.

The central government's emphasis on upgrading the quality of foreign investment projects - such as their environmental protection standards - might also have contributed to the decline.