Supply glut, Asia turmoil trigger 14pc fall in FDI

The mainland's actual foreign direct investment (FDI) last month fell 14.25 per cent year on year to US$1.85 billion, according to the International Business daily.

In the first two months of this year, actual FDI fell 12.1 per cent year on year to $3.86 billion.

The fall was due to last year's contracted FDI, which indicated the trend of this year's actual FDI, Morgan Stanley Dean Witter economist Andy Xie Guoshong said.

He said the falling trend was triggered by the region's financial turmoil and the mainland's glut in supply.

'FDI to the mainland was mainly made by overseas Chinese in Southeast Asia and they had been hurt too badly by the region's financial turmoil to further invest,' he said.

Mr Xie said a serious glut in the mainland's property sector and light industries also contributed to the fall.

'The investors lost their appetite as the over-supply eroded the investment return rate,' he said.

Contracted FDI, an indicator of future trends, rose 17.44 per cent year on year to $2.8 billion last month.

It increased 13.6 per cent year on year in the first two months this year to $6.5 billion.

The rise was due to the lower comparison base of the same period last year, when the financial turmoil had already taken a heavy toll, Mr Xie said.

FDI had been falling in the past two years despite the government's efforts to attract more investment to accelerate the slowing economy.

This year, Beijing tried to find a new focus of economic growth by developing the country's backward western inland region.

It has rolled out a package of incentives to attract FDI to the region.

The country attracted $40.4 billion in actual FDI last year, down 11.4 per cent from the previous year, according to official reports.