China's FDI inflows recover in June

Foreign direct investment (FDI) into the Chinese mainland reversed the decline seen in May, edging up 0.2 percent year on year to 14.42 billion U.S. dollars in June, the Ministry of Commerce (MOC) said on Tuesday.

In the first six months of 2014, FDI, which excludes investment in the financial sector, stood at 63.33 billion U.S. dollars, up 2.2 percent from the same period last year, the ministry said.

In the January-June period, FDI into the service sector climbed 14.8 percent year on year to 35.2 billion U.S. dollars, accounting for 56 percent of the total FDI. FDI into the manufacturing sector dropped 13.9 percent to 22.8 billion U.S. dollars, or 36 percent of the total.

Investment from the Republic of Korea and the United Kingdom remained robust in the first six months, up 45.6 percent and 76.4 percent year on year respectively. But FDI from Japan slumped 48.8 percent year on year. FDI from the United States went down 4.6 percent year on year.

MOC spokesman Shen Danyang identified the decline in investment as "short-term volatility", saying that these fluctuations are normal and that the cross-border investment situation shall be based on observations in the medium to long run.

Shen said that the decline in FDI from the U.S. is narrowing. Furthermore, U.S. investors founded 567 companies in China in the first half of 2014, 4.4 percent more than a year ago, he added, citing eased restrictions on registered capital for foreign investors.

Shen allayed concerns that China is no longer competitive in attracting foreign investment. "The Chinese government repeatedly stresses that China treats all types of companies as equal," he said, emphasizing that overseas investors have plenty of opportunities in China.

"We are quite optimistic about China-U.S. bilateral investment cooperation," the spokesman said, after the just-concluded annual China-U.S. Strategic and Economic Dialogue.

According to the MOC, foreign investors set up 10,973 new companies in the first six months of 2014, up 3.2 percent year on year, compared with a 1.6-percent increase in the January-May period.

On the other hand, China's outbound direct investment (ODI) by non-financial firms dropped 5 percent to 43.34 billion U.S. dollars in the first half of the year.

Investment went to 3,224 overseas enterprises in 146 countries and regions. Hong Kong, the Association of Southeast Asian Nations, the EU, Australia, the U.S., Russia and Japan received 66.5 percent of ODI, or 28.82 billion U.S. dollars.

During the period, investment to Hong Kong plunged 29.3 percent year on year, whereas investment to the EU and Russia climbed 221.7 percent and 109.5 percent respectively. Investment to the U.S. added 12.8 percent to 2.46 billion U.S. dollars.

Shen attributed the moderate non-financial ODI to a host of reasons, including a high comparative base last year, slowing macro-economic growth and exchange rate fluctuation.

Falling prices of bulk commodity on global markets have also made some Chinese firms reluctant to invest, Shen added, citing 46.3 percent less investment in the overseas mining industry from China during the January-June period.

However, Shen forecast ODI growth for the whole year to reach as high as 10 percent, with more measures to boost investment and to simplify investment procedures rolled out, as well as big mergers and acquisitions being delivered.