News & Reports News Year 2013 January 2013 Foreign investment dips in 2012

Foreign investment dips in 2012

FOREIGN direct investment in China fell 3.7 percent from a year earlier to US$111.7 billion in 2012, the first yearly drop in three years, the Ministry of Commerce said yesterday.

In December alone, foreign investors channeled US$11.7 billion funds into China, down 4.5 percent, a seventh consecutive monthly decline.

Ministry spokesman Shen Danyang attributed the 3.7 percent cut in foreign funds partly to less investment in manufacturing.

He said some investors have moved out of China for even cheaper labor costs and less stringent production criteria. But "such phenomena were within a normal range, not becoming a large-scale outflow," Shen said.

"China welcomes foreign investors, and will continue to improve the investment environment to attract more foreign investment," Shen said.

Li Maoyu, an analyst at Changjiang Securities Co, said gloomy global economic conditions, rising labor costs in China and the nation's more strict investment criteria were among the reasons for dwindling foreign investment. "China is just one of the many countries suffering less foreign investment in a bad global economic climate," Li said. "It remains one of the top choices for global businesses."

China surpassed the United States in the first half of last year to become the world's largest market for foreign direct investment, indicating foreign investors' confidence in China is still strong. Shen said some firms, such as Wal-Mart from the United States and Veolia Environment from France, exhibited strong interest in expanding their stake in China at a meeting last month.

As for rising labor costs, Shen said China retained advantages considering the vast pool of China's workforce and Chinese people's strengthening skills.

Last year, China's manufacturing sector digested US$48.8 billion in foreign investment, contracting 6.2 percent on an annual basis.

Funds flowing into the service sector fell 2.6 percent to US$53.8 billion, led by a 10.3 percent cut in investment in the property market. Excluding real estate, investment in the nation's service sector grew by 4.8 percent.

Capital from the European Union fell 3.8 percent to US$6.11 billion in 2012, but investment from Germany, the Netherlands and Switzerland bucked the trend with 29.5 percent, 49.1 percent and 58.1 percent increases, respectively. Investment from Japan rose 16.3 percent to US$7.38 billion and the US raised its investment to US$3.13 billion, up 4.5 percent.

China's non-financial outbound direct investment rose 28.6 percent to US$77.2 billion in 2012 as domestic investors pumped money into 4,425 overseas companies in 141 countries and regions. China's investments in Russia surged 117.8 percent from a year earlier, followed by those in the US, Japan and the ASEAN countries, with increases of 66.4 percent, 47.8 percent and 52 percent, respectively.