China 2012 FDI Falls for First Time in Three Years

Foreign direct investment (FDI) into China slipped 4 percent in 2012, falling for the first time since the onset of the global financial crisis.

 

The world's second largest economy attracted $111.7 billion worth of foreign direct investment last year -- lower than 2011's record $116 billion and Beijing's annual target of $120 billion.

 

European and Asian firms slashed their Chinese investment by the widest margin, even though Asia remained by far China's biggest foreign investor.

 

Inflows from the European Union slipped 3.8 percent in 2012 from a year ago to $6.1 billion, while FDI from the top 10 Asian economies -- including Hong Kong, Japan and Singapore -- dropped 4.8 percent last year to $95.7 billion.

 

Investment from the United States, however, rose 4.5 percent on the year to $3.1 billion.

 

Data showed FDI into the services industry fell 2.6 percent to $53.8 billion, while manufacturing inflows dropped 6.2 percent on the year to $48.9 billion.

 

Excluding investment in the property sector, however, FDI into the services sector rose 4.8 percent in 2012 from 2011.

 

Investment in the property sector had declined 10.3 percent on the year, as Beijing's three-year crackdown on housing speculation took a toll on sentiment.

 

Analysts however say that the decrease in FDI does not reflect investor confidence.

 

"We will see FDI bouncing around $110 billion to $120 billion for some years," Tim Condon, an economist with ING in Singapore, told Reuters. "Hopefully, the current administration is going to intensify reform efforts such as opening of the capital account. That could be momentous in terms of attracting more FDI."

 

China joined the World Trade Organisation in November 2001 and FDI inflows have more than doubled since. According to OECD, China rivals the United States to be the world's top FDI destination, with the United States pulling ahead of China by a slim margin in 2011.

 

 

 

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