Foreign direct investment in China drops further

Foreign direct investment in the mainland fell last month for the ninth time in 10 months this year, while outward investment remained buoyant.

The steady decline in foreign investment highlights the challenges facing Beijing's new leaders as they cope with a global economic downturn while rebalancing the domestic growth model as rising labour costs begin to hurt the country's manufacturing competitiveness.

Foreign direct investment fell 0.24 per cent from October last year to US$8.3 billion, the Ministry of Commerce said yesterday. Despite the decline, it was still an improvement on September, when investment dropped 6.8 per cent.

For the first 10 months, FDI is down 3.45 per cent at US$91.7 billion. The figure excludes investments in the banking, securities and insurance sectors.

In comparison, outward investment by non-financial Chinese firms rose 25.8 per cent in the 10 months to US$58.2 billion.

"In future, China may gradually become a country with more investment outflows than inflows," said Huang Yiping, the chief economist for emerging Asia at Barclays Capital.

The downward trend in foreign direct investment was likely to continue as the country's manufacturing industry slowed and the global economic outlook remained bleak, said Huang. At the same time, conditions for Chinese companies to invest abroad were improving.