China's FDI inflows down 6.7 pct in May

Foreign direct investment (FDI) into the Chinese mainland fell 6.7 percent year on year to 8.6 billion U.S. dollars in May, the Ministry of Commerce (MOC) said on Tuesday.

In the first five months of 2014, the FDI, which excludes investment in the financial sector, came in at 48.9 billion U.S. dollars, up 2.8 percent from the same period last year, the ministry said.

In January-May, the top five investors in the Chinese mainland were Hong Kong, Taiwan, Singapore, the Republic of Korea (ROK), and Japan. Investment from the ROK and the United Kingdom saw the biggest rises, up 87.9 percent and 62.2 percent year on year, respectively.

However, FDI from Japan slumped 42.2 percent from a year ago, while that from the United States fell 9.3 percent year on year. Investment from the European Union (EU) shed 22.1 percent in the first five months to 2.58 billion U.S. dollars.

Investment from the Association of Southeast Asian Nations (ASEAN) dropped 22.3 percent to 2.54 billion U.S. dollars, but MOC spokesman Shen Danyang denied it was affected by tensions with neighboring countries.

Shen attributed the drop to a high comparative base last year resulting from big projects and said the decline did not represent any trend.

"Our economic and trade cooperation with the ASEAN is not affected by current factors in the neighboring areas," he said, adding that economic cooperation between the two sides will maintain growth momentum.

But Shen noted that foreign investment into the service sector has been accelerating and it is a trend that is unlikely to be reversed.

In the first five months, FDI into China's service sector rose 19.5 percent year on year to 27.5 billion U.S. dollars, accounting for 56.2 percent of the total. Data in the first four months showed investment into the sector climbed 19.1 percent year on year.

On the other hand, investment in manufacturing dropped 16.5 percent to 17.4 billion U.S. dollars.

Shen explained that China announced many policy measures to boost the service sector amid its economic restructuring, providing more opportunities for foreign investors, and there is another key document being drafted to cover this area.

As for manufacturing, the spokesman noted that the sector tends to attract a smaller share of total FDI, but he expressed hope that some sections of the sector, including advanced manufacturing, will remain a magnet for foreign investment.

Tuesday's data also showed that foreign investors set up 8,744 new companies in the first five months of 2014, up 1.6 percent year on year.

Shen responded to a report from the EU Chamber of Commerce in China that found companies were less confident in China's business climate.

He said problems that EU companies encountered are not new and the government is striving to solve them. He said China holds advantages in attracting foreign investment although there is room for improvement.

In late May, the ministry announced a three-month pilot program to streamline the approval process for FDI projects.

Separate MOC data showed on Tuesday that China's outbound direct investment in non-financial sectors slumped 10.2 percent year on year to 30.81 billion U.S. dollars January-May due to plunges in major investment destinations.

But the United States saw investment from China soar 144 percent to 2.03 billion U.S. dollars, while Russia and Japan also saw surges of more than 100 percent due to relatively low bases in the same period last year.