FDI extends fall in China

Foreign direct investment in the mainland extended its fall last month, a sign that may prompt Beijing to consider further steps to boost domestic consumption and upgrade industries.

Despite China's gradual loss of status as the world's factory due to demographic shifts, some expect a mild global economic recovery may improve business sentiment in the country later this year.

Investment coming into the mainland dropped 7.3 per cent last month to US$9.27 billion from a year earlier, dragged down by a 14 per cent decline in property investment, the Ministry of Commerce said yesterday. FDI fell 3.7 per cent last year.

HSBC analyst Trinh Nguyen in January pointed out a "great migration" of investment, where multinationals had been gradually shifting businesses to emerging markets such as Vietnam and Indonesia due to rising costs from higher wages and currency appreciation on the mainland, which had hurt its competitiveness.

The ministry's spokesman Shen Danyang, however, said yesterday that the fall in FDI in a single month might not necessarily represent the picture for the whole year.

China was still the world's second-largest recipient of foreign investment last year after the United States, he said.

Everbright Securities chief economist Xu Gao said the decline in FDI was mainly due to a global economic downturn rather than any big changes in the country's competitiveness.