China Economy

Foreign direct investment in China forecast to remain steady

Ministry rules out sharp fall as mainland is still one of the main destinations for multinationals

PUBLISHED : Wednesday, 19 December, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:01pm


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Foreign direct investment flowing into the mainland will remain steady rather than fall sharply next year as the economy continues to recover, the Ministry of Commerce says.

Ministry spokesman Shen Danyang made the forecast yesterday after data showed foreign direct investment fell 5.4 per cent from a year earlier to US$8.29 billion last month, widening from a decline of 0.24 per cent in October.

In the first 11 months of the year, foreign investment dipped 3.6 per cent to US$100.02 billion.

Shen acknowledged that global investment had been diverted to many other countries in recent years, partly because of rising costs on the mainland.

However, he said China would remain "one of the main investment destinations" for multinationals as the domestic market had huge potential with supply of "relatively high labour quality" and favourable economic fundamentals.

Leaders at the Central Economic Work Conference kept the country's initial target for next year's economic growth unchanged at 7.5 per cent but lowered the inflation target to 3.5 per cent from 4 per cent this year, Bloomberg reported yesterday, citing unnamed officials briefed on the matter.

Observers had widely expected the new leadership to keep the growth target unchanged to signal policy stability.

Investment from the United States rose 6.3 per cent in the 11-month period from a year earlier to US$2.9 billion, while investment from Japan grew 11.3 per cent at US$6.6 billion. Inflows from the European Union fell 2.9 per cent to US$5.8 billion.

Shen noted the acceleration in retail sales, which grew 14.9 per cent last month. "The contribution from consumption to economic growth in the first three quarters exceeded contributions from investment for the first time since 2006," he said.

The ministry said retail sales would grow 14.3 per cent this year. However, trade growth still faced challenges because of the bleak external environment, Shen said.

Outward investment by non-financial companies remained strong, rising 25 per cent in the January-November period to US$62.5 billion. Beijing has been encouraging companies to invest abroad after foreign-exchange reserves ballooned by more than tenfold in the past decade to more than US$3 trillion.

In the first 11 months, mainland firms' direct investment in the US reached US$1.1 billion, up 13 per cent from a year earlier, Shen said.

He urged the US to reduce discrimination against investment from China by making security reviews "open, fair and transparent".

At the annual trade talks in the US starting today, Vice-Premier Wang Qishan would discuss with his US counterparts issues including easing barriers on investment and exports, Shen said.