Foreign funds flow still slowing, down 3pc so far this year

PUBLISHED : Thursday, 15 September, 2005, 12:00am
UPDATED : Thursday, 15 September, 2005, 12:00am

New global investment trends blamed for continuing decline

The level of foreign investment on the mainland dropped by just more than 3 per cent in the first eight months of this year, according to the Ministry of Commerce.

The downward trend in foreign direct investment (FDI) continued last month, albeit slightly, declining 0.26 per cent year on year.

The 3.02 per cent decline in FDI between January and August is less steep than that recorded in the first seven months of the year. The ministry said last month that the mainland had attracted US$33.1 billion in FDI from January to July, 3.42 per cent down on the same period last year.

Analysts said the decline was not surprising.

Professor Zhang Qi , of Beijing Normal University's Institute of Economic and Resources Management, said new global investment trends, rising protectionism and domestic industrial restructuring were behind the downturn in foreign capital inflow.

The decline in foreign investment on the mainland this year is the first in five years.

Professor Zhang said China still needed FDI as it would help solve the severe unemployment problem faced by the vast number of labourers in rural areas.

Citigroup economist Huang Yiping said the August figure suggested that FDI inflows had stabilised and he predicted that this year's absolute figures were likely to match last year's.

Mr Huang said that the decline last month showed a slight strengthening compared with data from the previous few months.

The mainland attracted US$38 billion in actual FDI from January to August, according to statistics published on the ministry's website yesterday.

Contracted foreign direct investment, which suggests future trends, stood at US$112.7 billion in the first eight months, an increase of 20.7 per cent over the same period last year.

The government approved 28,393 new foreign-invested ventures in the first eight months, down 1.03 per cent year on year.

It approved 3,741 foreign-invested ventures last month, with actual FDI of US$4.9 billion, down 0.26 per cent year on year, and contracted FDI reaching US$14.1 billion, up 32.05 per cent.

The mainland has received massive inflows of foreign capital since agreeing to open its markets wider to foreign investors as part of the conditions for entering the World Trade Organisation in 2001.

The nation topped the world in FDI last year, overtaking the United States for the first time. It attracted a record US$60.6 billion in actual investment as overseas manufacturers ramped up spending.