Decline may be reversed in 2013 on growth recovery, official says

China expects stable growth of foreign direct investment into the country next year although FDI continued to fall in November.

The country's FDI decreased 5.4 percent in November from a year earlier to $8.29 billion, and the pace of the drop accelerated from 0.24 percent in October, according the Ministry of Commerce on Tuesday.

A steel factory in Dalian, Liaoning province. Solid economic growth next year is expected to reverse the decline of foreign investment into China. [Photo/China Daily]

Except for a 0.05 percent increase in May, the country's FDI has been declining since November 2011, as labor costs rose and economic growth slowed.

However, "China won't see a big drop in its FDI volume in 2013 because there still is motivation for foreign investors to tap into the attractive Chinese market", Commerce Ministry spokesman Shen Danyang said at a news conference on Tuesday.

Shen said that China's investment environment has been improved constantly and the economy is set to further rebound next year, and both are advantages and fundamental factors for the country's use of foreign capital.

China remains multinational companies' top investing destination, and most of them will continue to expand their businesses in the country, according to a ministry survey.

From January to November, China's FDI, which does not include foreign investment in the financial sectors, amounted to $100.02 billion, a decrease of 3.6 percent year-on-year.

But investment from developed economies, including the United States, Germany and Japan, grew robustly.

Investment from the United States increased 6.3 percent year-on-year to $2.91 billion from January to November, and that from Germany rose by 25.8 percent, offsetting the weak performance of the European Union as a whole. The EU's investment in China dropped by 2.9 percent for the period.

He Weiwen, co-director at the China-US-EU Study Center of the China Association of International Trade, said that amid the slowdown of FDI overall, several factors will promote FDI's recovery next year.

"The further opening-up of the Chinese market promised by government officials will help promote the investing environment in China and turn the temporary FDI downturn into a moderate increase in 2013," He said.

The slowdown of FDI partly resulted from the excessive production capacity of domestic manufacturing industry, according to He.

FDI into the manufacturing industry shrank by 7.1 percent year-on-year to $43.97 billion from January to November, according to the ministry.

Foreign investors are shifting their focus from manufacturing to the services industry. The services industry attracted $47.57 billion of foreign investment from January to November, down 2.5 percent year-on-year, the ministry said.

"To be frank, China's FDI will face a tough situation next year, as global investment has been unavoidably divided into other countries in the world since the onset of the global financial crisis," Shen said.

The rising costs of domestic raw materials also have affected foreign investment's uptrend in China.

But Shen also said that some countries who claimed that China's investing environment has deteriorated have reduce foreign investors' confidence in the Chinese market to some extent.

Commerce Minister Chen Deming rejected that claim earlier.

"It's groundless to say that China's investing environment has deteriorated," he said.

Shen is optimistic about the FDI outlook.

"In 2013, the ministry will take measures to maintain the size of China's FDI and enhance the quality of foreign capital utilization," Shen said.

China will emphasize the protection of intellectual property rights and foreign enterprises' rights. The ministry will work hard to help facilitate foreign investment, officials have said earlier.

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