China’s Foreign Investment extends longest run of declines

The Commerce Ministry said on Friday that China drew $83.4 billion in foreign direct investment between January and September, with September’s inflow alone down 6.8 percent on year-ago levels at $8.4 billion.

The shrinking FDI figure followed a raft of economic activity indicators released on Thursday that pointed to a mild recovery in the growth momentum in September, although the economy slowed for a seventh straight quarter in the July-September period.

Earlier data showed China’s foreign exchange reserves, the world’s largest, rose to $3.29 trillion at the end of September from $3.24 trillion at the end of June. The $50 billion rise came after a $65 billion drop in Q2.

Despite evidence of corporate caution in the face of uncertain global demand, China’s trade showed signs of improvement last month, with exports rising at twice the rate expected by economists and imports returning to the path of expansion, suggesting Beijing’s measures to underpin growth are starting to show results.

China rolled out an array of measures last month to help stabilize export growth, speeding payments of export tax rebates, easing access to bank loans and cutting fees.

China has an official target of 10 percent growth in both exports and imports for 2012. But some trade officials have cast doubt about the ability to achieve it given the uncertainties hanging over external demand.

Commerce Ministry data showed investment inflows from the European Union dropped 6.3 percent year-on-year in the first nine months to $4.8 billion, while investment by U.S. firms dropped 0.6 percent to $2.4 billion.

FDI inflows from the top 10 Asian economies, including Hong Kong, Japan and Singapore, fell 4.9 percent between January and September versus the same period a year ago to $71.0 billion, the ministry said.

FDI is an important gauge of the health of the external economy, to which China’s vast factory sector is oriented, but its contribution to total capital flows is dwarfed by exports, which were worth about $1.9 trillion in 2011.

Via – CNBC


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