China sees further fall in foreign direct investment

PUBLISHED : Thursday, 06 March, 2014, 1:20am
UPDATED : Thursday, 06 March, 2014, 1:20am

China lured less foreign direct investment than Southeast Asia's biggest economies combined last year as wages grew more rapidly and the labour force shrank, Bank of America Merrill Lynch said in a report yesterday.

Foreign direct investment into Singapore, Malaysia, Indonesia, the Philippines and Thailand rose 7 per cent to US$128.4 billion from US$120 billion in 2012, economist Chua Hak Bin said. The amount into China fell 2.9 per cent to US$117.6 billion, declining for a second year.

A drop in China's working-age population is robbing President Xi Jinping of an engine of three decades of growth, even as it helps the government restructure the economy away from investment and manufacturing-led expansion.

The situation is reversed in Southeast Asia's developing nations, where rising numbers of young people seek employment, luring firms seeking a cheap workforce and new markets.

"Rising foreign direct investment into Asean (Association of Southeast Asian Nations) will likely remain a favourable structural trend over the next few years, given favourable demographics, competitive wages and geopolitical competition between the superpowers which remain the major investors," Chua said.

China's ability to attract investment might be hampered by higher wages and an appreciating currency, he said.

Indonesia has overtaken China and India as the most promising nation for Japanese firms for business development, a Japan Bank for International Co-operation survey found.

"A large domestic market, low relative wages despite minimum wage increases and a weak rupiah may be helping to lure foreign investment" into Indonesia, Chua said.