Slowdown seen in Feb FDI inflows

China received $19.31 billion in foreign direct investment (FDI) in the first two months of 2014, data from the Ministry of Commerce (MOC) showed Tuesday, with the data pointing to a sharp slowdown in investment inflows during February.

The FDI data, which excluded capital flows into the banking, securities and insurance industries, showed a rise in FDI of 10.44 percent year-on-year in the first two months, Shen Danyang, a spokesman for the ministry, told a news conference in Beijing, without releasing figures for February alone.

Calculations by the Global Times based on the published statistics showed that the nation received $8.55 billion in FDI last month, an increase of 4.05 percent year-on-year but down from a 16.11 percent rise in January when FDI hit $10.76 billion.

Seasonal distortions due to the traditional Chinese Lunar New Year holidays, which began on January 31 this year, were partly to blame for the February slowdown, Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation under MOC, told the Global Times Tuesday.

The yuan's depreciation in February may also have weighed on capital flows into the country, Huo said.

China's financial institutions purchased a net 128.2 billion yuan ($20.72 billion) worth of foreign exchange last month, down sharply from the previous month's 437.4 billion yuan, according to figures released Tuesday by the People's Bank of China (PBOC), the central bank, indicating a lower inflow of capital during the month.

A slowing economy amid the government's rebalancing efforts is inevitably affecting growth of new capital inflows, which are normally used to expand production capacity, Zhang Lei, a macroeconomic analyst at Minsheng Securities in Beijing, told the Global Times Tuesday, pointing to the connection between overall economic conditions and FDI growth.

However, MOC's Shen said the monthly fluctuations would not dent investors' confidence in China's ability to attract FDI.

The nation's environment for foreign investment has been improving, making the domestic market a favorable investment destination, Shen stated.

While currency swings may lead to fluctuations in capital flows in the near term, a more market-based exchange rate regime will help squeeze the hot money bubble and increase the flow of capital into the real economy, Huo noted.

China's actualized FDI for the whole year is likely to be slightly higher than for 2013, he forecasted.

Greater two-way fluctuations in the yuan will be the norm and the government will continue keeping the yuan basically stable, Shen told the news conference.

The country is expected to see stable growth in overall investment flows, although FDI is set to lean more toward central and western regions of the country and the services industry, in line with the country's economic restructuring, Zhang of Minsheng Securities also remarked.

The MOC data showed that China's outbound direct investment fell by 37.2 percent in January-February from a year earlier to $11.54 billion.

The fall was due to a high base of comparison last year caused by the $15 billion acquisition by China National Offshore Oil Corporation of Canadian oil and gas firm Nexen Inc, according to Shen.

If that acquisition was set aside, the nation's ODI would have registered a 33.6 percent rise in the first two months, he said, noting that it is hard to analyze general trends based on the readings for one or two months.