FDI revives, rises for second month in mainland China

High-end manufacturing and services sectors a big draw as Europe and US boost investment

PUBLISHED : Friday, 19 April, 2013, 12:00am
UPDATED : Friday, 19 April, 2013, 4:05am

Foreign direct investment in mainland China rose for a second month in March, driven by greater inflows from Europe and the United States.

Ministry of Commerce spokesman Shen Danyang said foreign investments had been steady, adding that the high-end manufacturing and services sectors had seen rapid fund inflows.

Investments in March rose 5.65 per cent from a year earlier to US$12.4 billion. That contributed to a year-on-year rise of 1.44 per cent in investments for the first quarter, ministry data showed.

Foreign investments declined in 11 months last year.

The number of newly established foreign-invested enterprises, however, fell nearly 20 per cent in March and 10.4 per cent in the first quarter.

President Xi Jinping met leaders of multinationals including PepsiCo and Toyota Motor at the Boao Forum this month, reassuring them China would maintain sound growth and protect their rights and business interests.

But Giordano Lombardo, the global chief investment officer of Pioneer Investments, said at a forum in Beijing: "Some of the Asian countries [such as Indonesia, the Philippines and Thailand] can benefit from lower costs and re-inshoring of industrial activities as China loses cost-competitiveness."

In the first quarter, investment from the US climbed 18 per cent from a year earlier while that from the European Union leapt 45 per cent.

Shen noted positive changes in the investment pattern. Investment in the computer, telecommunications and other electronics equipment industries rose 12 per cent in the first quarter while that in transport equipment was up 29 per cent.

Transport services attracted 57 per cent more foreign funds during the period, while investment in the power, gas and water sectors surged 146 per cent.

But foreign investment in the real estate sector, once a hot spot for speculation, fell 6 per cent, Shen said.

He warned the 18.4 per cent export growth seen in the first quarter, which beat market expectations, might not be possible to sustain.

"Chances for export data to show sharp monthly volatility have increased," Shen said, as external demand remained unstable while firms were more inclined to sign short-term orders.

Analysts have widely questioned the figures showing a jump in export growth, citing contradicting regional data. They have voiced concern that exporters may have inflated the numbers to channel more foreign exchange into the mainland to bet on yuan appreciation and deploy in the capital markets.

Shen said the ministry would investigate the issue.