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China sees first hike in FDI in 11 months

By Li Jing and Si Tingting (China Daily)
Updated: 2009-09-16 07:41

Foreign direct investment (FDI) in China rose 7 percent year-on-year to $7.5 billion in August, the first hike in 11 months after the country was hit by the global financial crisis, according to the Ministry of Commerce (MOFCOM).

That compared with a 35.7-percent drop in July. The growth of foreign investment in the manufacturing sector contributed to the hike, Yao Jian, the ministry's spokesman, said Tuesday.

Statistics show that manufacturing industry attracted $4.29 billion of foreign investment in August, an increase of 11.72 percent year-on-year. But that of services industry dropped 7.78 percent from a year earlier.

"Foreign investment in China's manufacturing sector has been particularly stable and has seen no major fluctuations since last October," said Yao. "This shows the country is providing a favorable investment environment for overseas companies with its rich labor resources and sound management system."

However, the FDI figure from a single month cannot reflect the whole picture of foreign investment because the monthly figures varied greatly, said Yao.

His view is shared by Liu Yuhui, director of the Center for Chinese Economic Evaluation at the Chinese Academy of Social Sciences, who suggested a month by month comparison was more meaningful.

Related readings:  FDI rises 7% in August  Egypt looks to China to make up FDI shortfall  Confidence set to keep FDI flowing  Brake on hot money leads to drop in FDI  China's FDI falls 35.7% in July

"The country's foreign investment already recorded a big fallback last August, when the global financial crisis started to take its toll on China. Therefore the year-on-year growth does not say much about the true situation regarding investment inflows," said Liu.

The country's foreign investment reached $8.961 billion in June, but fell to $5.36 billion in July.

China is a top investment destination but double-digit growth rates plunged since 2008 as foreign companies were hit by the global downturn and cut spending. Foreign direct investment in the first eight months fell 17.5 percent to $55.86 billion, compared with the same period last year.

The country's rebound from the slowest growth in a decade may attract more money from abroad, helping to fuel the recovery.

August economic data shows that the country's recovery is strengthening as industrial production, urban fixed-asset investment, retail sales and new lending accelerated.

"Global risk appetite is coming back," Isaac Meng, a senior economist at BNP Paribas SA in Beijing, was quoted by Bloomberg News as saying. "For multinational companies, China is the place where growth is the most robust."

Yao also said MOFCOM will further streamline the approval process of foreign investment to attract more money inflows in the future.