Foreign direct investment in China fell for the second straight month in December as global financial turmoil dimmed companies’ appetite for spending.
Investment from overseas fell 12.73 percent to $12.24 billion last month from a year earlier, the Ministry of Commerce said in a statement in Beijing today. For the full year, spending rose 9.72 percent to a record $116 billion, the data showed. Investment fell 9.8 percent in November, the first decline since 2009.
China announced amendments to policies to attract foreign funds last month, changes that may weigh on spending in some industries this year. Europe’s debt crisis and anticipated weaker growth in the U.S. this year may also limit investment, with central bank Governor Zhou Xiaochuan warning this month a global downturn could lead to “large” capital withdrawals from the country.
“Foreign investment faces challenges and won’t grow very fast this year,” said Shen Jianguang, chief Greater China economist at Mizuho Securities Asia Ltd. in Hong Kong. “Some industries are facing overcapacity” and it will “take time for investment to pick up” in services and renewable energy industries that the government wants to encourage, he said.
The Ministry of Commerce said on Dec. 30 that the outlook for foreign investment this year is “not optimistic.”
Approval Difficulties
China will stop encouraging foreign investment in industries including automobile manufacturing and polysilicon, a material used to make solar panels, according to an updated catalog issued last month by the National Development and Reform Commission, the nation’s top economic planning agency.
The change means overseas carmakers will probably have difficulty getting state approval to build future plants in the country, according to research firm LMC Automotive. Even so, General Motors Co., the biggest overseas automaker in China, said last month it expects the new guidelines will have “minimal negative impact” on its plans.
The nation’s auto sales slowed last year, trailing growth in the U.S. for the first time in at least 14 years, after the government ended stimulus measures and economic expansion eased.
Gross domestic product rose 9.2 percent last year, slowing from 10.4 percent in 2010, the statistics bureau said yesterday.
Source Bloomberg
