LONDON: China’s foreign direct investment grew 2.7 percent from a year earlier in the first two months of the year, accelerating from December’s 5.8 percent contraction, Ministry of Commerce data showed yesterday.
Foreign investors channeled 141.8 billion yuan (US$22.5 billion) into China in January and February, with investment in the service sector leading the way.
Capital flowing into services grew 5.7 percent year on year to reach 89.1 billion yuan, or 62.8 percent of the total investment. Services related to high technology surged 156.6 percent to 15.9 billion yuan.
Investment from the UK, the United States and Singapore was up the most, by 120 percent, 111 percent and 54 percent, respectively.
Japanese investors also raised their investment, by 14.5 percent.
“China still sees steady growth of foreign investment,” said Lian Ping, chief economist at Bank of Communications. “It is thanks to the government’s candid attitude and straightforward explanation of the country’s economic slowdown as well as its efforts of sustaining the growth momentum.”
The authorities have deemed China’s slowdown as “natural” after three decades of rapid expansion, and the country is working on supply-side reform to keep the pace of growth to between 6.5 percent and 7 percent this year.
China’s gross domestic product expanded 6.8 percent in the final quarter of last year, which concluded 2015 with a rate of 6.9 percent, the weakest in a quarter of a century.
The slowdown has not shaken foreign investors’ confidence in China, however. The country continues to be the world’s top investment destination with the most prospects for 2016 and 2017, according to a survey by the United Nations Conference on Trade and Development.
China attracted 781.4 billion yuan of foreign direct investment last year, a 6.4 percent increase on 2014’s figure.
Shen Danyang, a commerce ministry spokesman, said that China will be further lowering the entry barrier for foreign investment and speeding up the revision of relevant laws to encourage foreigners to invest further in high-tech, green and service industries where domestic supply was falling short.
Shen said that foreign investors were helpful in the reform of Chinese state-owned enterprises through their practice of taking over related counterparts.
“We support foreign participation in China’s SOE reforms,” he said. “Considering China’s limited capacity in handling various resources, the move by some foreign companies in taking over SOEs can help in activating market vitality and facilitating SOE reforms.”
Mergers and acquisitions have become an important model of foreign direct investment.
In the first two months, foreign investors spent 39.9 billion yuan in taking over Chinese companies, with the value up 17.3 percent year on year and accounting for 28.1 percent of the total weight, up from 24.6 percent a year earlier.
But it was still lower than the global average as 38 percent of global investments were conducted through M&As last year — a growth rate of 61 percent from a year earlier.
