FDI inflows falter again in July, ODI soars
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E-mail Xinhua, August 18, 2014
Foreign direct investment (FDI) into the Chinese mainland fell sharply again in July while overseas investment experienced strong growth, according to the Ministry of Commerce (MOC).
As Europe, Japan and the United States reduce their investment in China's manufacturing sector, China's FDI slumped 16.95 percent from a year earlier to 7.81 billion U.S. dollars, compared with a minor 0.2-percent increase seen in June, according to the ministry.
FDI drop "normal"
For the first seven months, the FDI, which excludes investment in the financial sector, stood at 71.14 billion U.S. dollars, down 0.35 percent from the same period last year.
"With China speeding up its economic restructuring, it's normal for us to have some fluctuation in FDI figures," Shen Danyang, spokesman of the MOC, said at a regularly scheduled press conference. "But such fluctuations are not evidence for changing trends."
According to the MOC, foreign investors set up 13,249 new companies in the first seven months of 2014, up 1.6 percent overall from last year, compared with a 3.2-percent increase in the first half of the year.
China's FDI in the January-July period mainly flowed into the service sector, which attracted 39.72 billion U.S. dollars of overseas investment, or 55.8 percent of the total during the period.
The FDI into the manufacturing sector in the January-July period fell 14.26 percent to 25.2 billion U.S. dollars, accounting for 35.4 percent of the total.
According to the MOC, the top overseas investors are Hong Kong, Taiwan, Singapore, Republic of Korea (ROK), Japan, the United States, Germany, France and the Netherlands. Collectively, they contributed 93.9 percent of the total.
Investment from the United Kingdom and the ROK remained strong in the first seven months, up by 61.2 percent and 34.6 percent, respectively.
However, Japanese investors cut their investment by 45.4 percent from previous year to 2.83 billion U.S. dollars during the period, while investment by the U.S and European Union dropped 17.4 percent and 17.5 percent, respectively.
Investment by the Association of Southeast Asian Nations (ASEAN) also dropped 12.7 percent from last year to 4.18 billion U.S. dollars.
Calling the FDI inflow in the first seven months "steady," Shen said he was confident that the full-year FDI inflow will maintain a growth rate similar to that of last year - an annual increase of 5.25 percent.
To meet such an expected growth rate, China will have to attract FDI inflows much faster in the coming months.
Shen said the service sector will attract more FDI than manufacturing, while central regions will continue to outpace the coastal areas in attracting overseas investment.
Xenophobia refuted
During the press conference, the spokesman refuted speculation that the decline in China's foreign direct investment (FDI) was related to the ongoing anti-monopoly investigations, saying "groundless speculation is completely unnecessary."
Shen played down the notion that xenophobia is behind the country's current anti-monopoly probe, saying foreign-funded and domestic companies are both equal before Chinese Law.
"Launching an investigation into monopoly-like behavior is a common practice internationally," Shen said, "we are not just targeting foreign-funded companies.
He said all market players, be it foreign-funded or domestic, will be punished if they violate the law.
"Before the Anti-monopoly Law, all enterprises are equal and there is no such thing as xenophobia," he said, noting both domestic and foreign firms have been probed following the establishment of the Anti-monopoly Law six years ago.
His comments come as complaints were lodged by foreign chambers of commerce about China's anti-monopoly investigations into foreign-funded companies of top brands such as Microsoft, Audi, BMW and Mercedes-Benz.
Shen stressed the important and positive role foreign-funded enterprises have played since China's reform and opening-up during the past three decades, saying a majority are law-abiding.
"Foreign-funded enterprises won't be scared back to their own country because of the (anti-monopoly) investigation cases," he said.
ODI back to growth
While keeping its position as one of the most popular destinations for foreign investment, China has become the world's third-largest investor by exporting capital worth 52.55 billion U.S. dollars to 149 countries or regions during the first seven months, according to the MOC.
The outbound direct investment (ODI) by Chinese non-financial companies soared 84.9 percent from previous year to 9.21 billion U.S. dollars in July, compared with a year-on-year decline of 5 percent in the January-June period.
The sharp ODI increase in July shook off the impact of China's massive outbound investment last year through large projects and contributed to a 4-percent annual growth for the first seven months, thus reversing a decline in aggregate ODI since February this year.
"In the near future, China's ODI will exceed the amount of FDI. And that will be a new normal," Shen said, looking to a full-year growth of 10 percent in China's outbound investment this year.
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