China loses shine for foreign money
Offshore direct investment in the mainland falls as economic slowdown and labour costs prompt multinationals to look elsewhere in the region
China's attractiveness to foreign investors waned last year for the first time since the global financial turmoil as the world's economy slumped and labour costs rose.
Foreign direct investment (FDI) dropped 3.7 per cent in 2012 to US$111.7 billion, as less capital flowed into China's real estate market and manufacturing, the Ministry of Commerce said yesterday. In December, FDI fell 4.5 per cent from a year earlier.
Last year's drop was sharper than the 2.56 per cent fall in FDI recorded in 2009, when the global financial crisis eroded the investment environment.
Preventing a sharp drop in foreign investment and a slowdown in trade growth are set to be major economic challenges for the country's new leaders.
"Multinationals have increasingly been shifting investment to other regional markets, such as the Philippines and Vietnam, as the mainland's competitiveness weakens," Nomura International chief China economist Zhang Zhiwei said.
Zhang expected the value of foreign investment to drop further by about 5 per cent this year.
Commerce Minister Chen Deming has tried to reassure the business community that the government will improve the investment environment to maintain the country's position as one of the world's top foreign investment destinations over the past two decades.