FDI inflows decline amid global economic turbulence
Although still on the rise in November, Foreign direct investment (FDI) begins to decline in capital inflows amid global economic turbulence.
According to the Ministry of Commerce on Nov 12, for the first 10 months, FDI reached 81.1 billion, up 35 percent compared to 45.6 percent for the first half of this year. The ministry did not release the figure for October, but the figure $74.4 billion in the first nine month suggested the October inflow was $6.72 billion, which slightly down from $6.78 billion for the same month last year.
Although China remains attractive to foreign investors, some lag effect will be apparent and investors will become more cautious next year. That will probably cause the shrink of FDI scale, analysts said.
Wang Zhile, an expert on foreign investment at the ministry said compared with the world’s economy, economy in China is relatively stable, and foreign investors are still confident in China’s economy. The figure can also show that the measures to control the inflows of hot money have started to work, according to Lu Jinyong, a professor at University of International Business and Economics.
At the beginning of this year, hot money flooded into China on expectation of the appreciation of yuan. However, government took countermeasures to stop Chinese currency from rising against American dollars, and they worked since July.
However, as some enterprises shift their capital to home countries and hold back on investment next year, the FDI slowdown will be more apparent.
Also, there are some side effects in the data of October. According to Zhu Baoliang, an economist at the National Information Centre, because companies usually sign contracts before their investment, the figure in the coming months will tend to drop.
Sherman Chan, an economist with Moody’s Economy .com, said, “Because of the high base earlier this year, FDI growth early next year is likely to be negative.”
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