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Foreign investment into China continues to rebound

06-19-2013 09:37 BJT

One close proxy for that is foreign direct investment inflows into the country. Latest figures from China’s Ministry of Commerce shows FDI inflows for the month of May remained steady. For the first five months, FDI inflows rose just a tad over 1-percent, while for the month of May alone, FDI increased nearly 3-tenths of a percent year on year. What does this all mean?

The headline FDI figure may be tepid -- May investments barely nudged up by nearly 3-tenths of a percent, but the underlying structural changes are significant.

Investments in the services sector rose more than 4 percent year on year. While FDI into manufacturing dropped 1.4 percent in the first 5 months of this year.

Geographically, foreign investments are flowing into China’s frontier markets where growth is faster.

"Western China attracted 3.7 billion U.S dollars of foreign investment in the first 5 months of this year, up more than 22 percent from the same period last year. Investment in the eastern region has come down 1.29 percent, and FDI into the central region has grown a modest 8.2 percent," Shen Danyang, Spokesman of China Ministry of Commerce, said.

The structural changes in where FDI is flowing to, reflects China’s transitioning economy. More services, less manufacturing. Faster growth in the interior versus the coastal areas. Professor Liu Jing from the Cheung Kong Graduate School of Business is confident about FDI into China in the long run.

Prof. Liu Jing, Dept. of Finance, CKGSB, said, "done....companies are waiting to see.... assume that the transition of growth model is relatively successful, FDI will come back in a big way"

Professor Liu also says that the government needs to come up with policies to encourage more FDI, as FDI plays a big role in China’s economy. In recent years China has phased out many of the policies favourable to foreign investors. More importantly, China need to create a level playing field for Chinese and foreign companies.


Editor:James |Source:

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