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Markets

Direct Investment

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Trends/Policies

FDI up by 75% in 1st two months

By Jiang Jingjing (China Daily)
Updated: 2008-03-13 09:54

China drew $18.13 billion in FDI in January and February, up 75.19 percent year-on-year, the Ministry of Commerce said yesterday.

In February alone, the country attracted $6.93 billion in FDI, up 38.31 percent from a year earlier, according to a statement published on the ministry's website.

Earlier reports had indicated FDI in January was $11.2 billion, 109.78 percent more than in the corresponding month of last year.

Commerce Minister Chen Deming attributed the first two months' increase mainly to the big rise in large-scale projects and a stronger renminbi.

In these two months, China logged 2.5 times more projects, with a price tag of more than $30 million, than the same period of last year, he said at a press conference during the ongoing National People's Congress.

He said the appreciation of the renminbi against the US dollar also encouraged foreign investors to rush here. "Since the renminbi is appreciating, foreign investors wanted to quickly change their dollars into renminbi to inject into China."

As growth in the developed world slowed, companies were looking more closely at emerging markets such as China, where the investment climate continued to improve, Chen added.

Li Huiyong, senior macroeconomic analyst at Shenyin and Wanguo Securities, said increasing labor and operational costs in China have caused many foreign investors to shift labor-intensive ventures to Southeast Asia, while hi-tech firms eye China's advantages in research and development abilities in the IT sector.

Foreign firms thus prefer to establish their R&D centers in China now, and such capital-intensive investment increased the total amount of FDI, he said.

Chen said greenfield projects accounted for around 97 percent of last year's FDI of $74.8 billion, and that the country encouraged FDI in the form of mergers and acquisitions. About 67 percent of the global FDI was in the form of mergers and acquisitions last year.

According to the ministry, there were 4,372 new foreign-funded enterprises in the first two months of 2008, down 23.51 percent from a year earlier. In February alone, there were 1,454 new foreign-invested firms, down 38.02 percent year-on-year.

In January and February, new US-funded companies fell 32.41 percent from a year earlier, although invested capital from the US increased 43.69 percent, the statement said.

New EU-funded firms fell 26.61 percent year-on-year, while capital inflows from the region surged 109.86 percent.