Global woes hit investors' appetite for China outlay

Foreign direct investment in China fell for the second straight month in December. It was a further sign of the impact that the European debt crisis and the sluggish US economy are having on China, though the full-year FDI figure still showed gains.

FDI in December slid 12.7 per cent from a year earlier to US$12.2 billion, the Ministry of Commerce said. For the full year, however, FDI was up 9.7 per cent at US$116.01 billion.

The December figure was up from US$8.75 billion in November, when it fell 9.76 per cent from a year earlier. The November drop was the first year-on-year decline since March 2010.

Analysts said weakening growth in the US and the sovereign debt crisis in the euro zone have dimmed foreign companies' appetite for investing in the world's fastest-growing major economy.

China's own growth outlook was another factor behind the decline in FDI in the last few months of 2011.

'One, cash-strapped foreign investors cut their investment in China as a result of the euro-zone debt crisis; two, some investors fear a hard landing in China,' said Ting Lu, chief China economist at Bank of America-Merrill Lynch. Lu said negative FDI growth could last several months.

Last year, China approved the establishment of 27,712 foreign-invested enterprises in the country, up 1.12 per cent from a year earlier.