FDI surges amid global recovery

PUBLISHED : Wednesday, 19 January, 2011, 12:00am
UPDATED : Wednesday, 19 January, 2011, 12:00am

Foreign direct investment in the mainland surged last year, passing the US$100 billion mark for the first time since 2008, amid a recovery in the global economy.

But growth slowed last month after three consecutive months of gains as December FDI grew 15.6 per cent from a year earlier to US$14.03 billion, according to data from the Ministry of Commerce, following November's 38.2 per cent increase to US$9.7 billion.

For the full year, inbound FDI rose 17.4 per cent to US$105.74 billion, reversing a 2.6 per cent decline to US$90.03 billion in the previous year. The growth rate for the full year, however, slowed from 17.7 per cent in the January-November period.

Tim Condon, chief economist with ING's Asian Research, said he believed China's accession to the World Trade Organisation triggered a productivity shock that saw FDI rise to US$100 billion from US$40 billion. 'We think the shock has passed and FDI will remain stable,' Condon said, adding he expected it to stabilise around US$100 billion annually for some years.

He said December was a seasonally strong month for FDI, averaging US$15 billion to US$20 billion in recent years. He pointed out that while last year's FDI inflows passed the US$100 billion mark, it was slightly lower than the record US$108.3 billion in 2008.

Inflows of FDI, a surging trade surplus and hot money betting on the yuan's appreciation have resulted in the fast growth in foreign exchange reserves, which may pass the US$3 trillion mark soon.

In a parallel development, the foreign exchange regulator warned that the country was facing growing challenges in managing its foreign reserves. There had been small amounts of hot money inflows into the economy because of expectations for a stronger yuan, Yi Gang, head of the State Administration of Foreign Exchange, said in remarks published on the agency's website yesterday.

Overseas investment by mainland companies in non-financial sectors totalled US$59 billion last year, up 36.3 per cent from a year earlier, the Ministry of Commerce said.

China will sign a series of trade and investment agreements with the United States in Chicago on Friday, a ministry statement said.

The statement did not elaborate but the agreements will likely be signed during President Hu Jintao's state visit.