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Josephine Ma

China's contracted foreign investment jumped sharply in the first half this year as foreign investors rushed to sign contracts before the tariff exemption for imported equipment was scrapped from April 1.

State Statistic Bureau (SSB) figures show the value of contracted foreign investment rose 46.3 per cent to US$45.6 billion.

Xinhua (the New China News Agency) quoted SSB spokesman Ye Zhen saying actual foreign investment in the first six months increased by 20.2 per cent to $19.77 billion.

The number of new foreign investment contracts fell 10.7 per cent in the half to 14,061 projects. Mr Ye said overseas investors concentrated on larger projects.

'China remains a place that attracts large foreign investment because of its large potential markets and opportunities,' Mr Ye said.

Economists expect the growth of contracted foreign investment will slow in the second half.

Benny Chiu at Hongkong Bank China Services said the leap in actual foreign investment was a natural result of the impressive rise in contracts signed late last year.

He believed growth in actual foreign investment would be stable in the second half as investors continued to inject capital into the projects signed.

Contracted foreign investment jumped 86.8 per cent in the first quarter as foreign investors and local governments rushed to conclude contracts for new projects within the grace period for tariff exemptions on imported machinery, given for contracts signed before April 1.

The figures released yesterday show an obvious drop in the growth of contracted foreign investment in the second quarter, to 12 per cent.

Mr Chiu said a negative growth rate was possible in the second half of the year following the inflow of foreign investment since late last year.

UBS Securities economist Qu Hongbin , describing the figures as impressive, said he considered upgrading the forecast for actual foreign investments for the whole year from the current 15 per cent.

Contracted foreign investment turned around from a negative growth in the third quarter last year. Growth was 33 per cent in the third quarter and 66.7 per cent for the fourth.

Mr Chiu said the half year statistics released yesterday showed the economy had continued its 'soft landing' as most of the figures in the second quarter, such as GDP growth and industrial output, had dropped from the first quarter.

Mr Qu said the statistics showed the state sector was facing mounting pressure and its contribution was shrinking. Industrial output increased by 5.8 per cent in the state sector, 17.9 per cent for collective enterprises and 14.3 per cent for other sectors.

Mr Ye said losses by state-owned companies were up 51.6 per cent to 41.6 billion yuan (about HK$38.68 billion). About 45 per cent of them were in the red in the first half.



Figures confirm investment rush to beat deadline