China FDI falls by most in 16 months

BEIJING — The amount of new foreign investment that China attracted last month shrank by the most in 16 months, hurt by waning growth in Asia’s largest economy. However, the government has remained optimistic, saying the outlook is brightening for exporters.

China drew US$8.6 billion (S$10.8 billion) in foreign direct investment (FDI) last month, down 6.7 per cent from May last year and the weakest performance since January 2013, Commerce Ministry data showed yesterday. Cumulative FDI for the first five months was US$49 billion, up 2.8 per cent from the same period a year ago, also the worst showing in a year.

Slowing momentum in the economy, with growth forecast to slide to a 24-year low of 7.3 per cent this year, has deterred companies from ploughing more cash into China. Expectations that the yuan would weaken and political tensions affecting trade could also have caused firms to delay new investments, economists said.

“There is indeed a trend of foreign firms investing less in China. Slowing economic growth is the main reason,” said ANZ Bank’s economist Zhou Hao.

However, the Commerce Ministry sounded hopeful yesterday, with its spokesman Shen Danyang saying: “Trade growth is expected to stabilise in coming months. Beijing has launched a slew of measures to underpin the trade sector and we can see exporters’ sentiment being boosted.”

He added that China’s move to boost the services sector in its economic restructuring has given foreign investors more opportunities.

In the first five months of the year, China’s services sector drew US$27.5 billion in FDI, up a fifth from a year ago and faring much better than manufacturing, where FDI fell 16.5 per cent to US$17.4 billion.

The biggest rise in FDI in the five-month period was from South Korea, with investment surging 88 per cent on an annual basis.

In contrast, investment from Japan, whose ties with China have been strained by territorial disputes, plunged 42 per cent, much sharper than a 22 per cent fall in investment from the European Union and a 9 per cent drop from America. AGENCIES