FDI growth moderates in first half

Nation remains top destination for foreign investors

China's foreign direct investment (FDI) inflows grew at a modest rate in the first half of this year, the Ministry of Commerce said on Tuesday, noting that the slower pace of growth will continue.

The country attracted $63.33 billion in FDI in the first six months, up 2.2 percent from a year earlier, slowing down from the 2.8 percent growth recorded in the first five months, data from the ministry showed.

"Some said the golden age for foreign investors in China is over, but we think the view lacks enough evidence," Shen Danyang, a spokesman for the ministry, told a news conference in Beijing.

"Although China's FDI growth has slowed down in recent years, its share of global FDI has kept rising," he said.

Of the total global FDI in 2013, the top destination remained China and the Asian region, according to a report released by the UN Conference on Trade and Development on June 24.

"Foreign investors had been attracted by China's cheap labor costs in the past, but the country's market potential will be the point of attraction in the future," Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Tuesday.

China's FDI inflows from the US, the European Union, Japan and Southeast Asian countries all recorded year-on-year drop in the first half, with that from Japan plummeting most by 48.8 percent, while FDI from the UK surged by 76.4 percent and FDI from South Korea rose by 45.6 percent, according to the ministry.

China has for the first time lost its leading position among Japanese firms as a favorable destination to develop business for the next three years. It ranked No.4 behind Indonesia, India and Thailand, mainly due to China's rising labor costs, fiercer competition and difficulty in quality management, said a white paper released by the Japanese Chamber Commerce and Industry in China on June 18.

Bai noted that political factors also contributed to the slump in Japan's FDI into China. "Given the tense Sino-Japanese relationship, some Japanese investors are looking to Southeast Asian nations to reduce their reliance on China," he said.

With developed economies' move to withdraw investment and China's efforts to improve investment structure, Shen predicted, China's FDI inflows will grow at a slower but steady pace in the future.

Bank of Communications predicted the FDI inflows would total around $110 billion in 2014, similar to the $117.6 billion in 2013, according to a research note released by the bank earlier this month.

Data from the ministry also showed that China's outbound direct investment fell by 5 percent year-on-year to $43.3 billion in the first half of 2014.

Besides a high base effect last year caused by oil giant China National Offshore Oil Corp's $15.1 billion bid for Canada's Nexen, the depreciation of the yuan and high financing costs have also made Chinese firms more cautious in investing overseas, Bai noted.