Despite the economic downturn, there has been an increase in FDI (Foreign Direct Investment) in China in August for the first time since October 2008. China has received a total of 7.5 billion USD worth of foreign investment in August; the Ministry of Commerce has stated that investment has risen 7% this year. Yet compared to the previous year, FDI as a total has dropped 35.7%, but this is expected due to the global financial crisis. Most of the foreign investment went into manufacturing (4.5 billion USD), while services and properties investment has been on a decline. Still, the increase in FDI has helped China’s recovery from the global financial crisis-FDI is one of the main engines of growth in China. As FDI continues to increase as the year goes on, it will further China’s growth trends for the 2009 year. Goldman has already forecasted a 9.4% growth in the Chinese economy for this year.
According to Bloomberg’s Li Yanping and Edward Hamlin,
“China’s rebound from the slowest growth in almost a decade may attract more money from abroad, helping to fuel the recovery in the world’s third-biggest economy…“Global risk appetite is coming back,” said Isaac Meng, a senior economist at BNP Paribas SA in Beijing. “For multinational companies, China is the place where growth is th”e most robust.”
There has been criticism from the EU about how FDI might have been curtailed in China through equity caps and joint-venture obligations, according to a Wall Street Journal article by Terrence Poon,
“European Union Trade Commissioner Catherine Ashton on Tuesday urged China not to curtail foreign direct investment into the country through equity caps and joint-venture requirements.In the text of a speech delivered in Xiamen, southern China, Ashton described drops in bilateral investment last year as “warning signs” in Sino-E.U. investment ties.”
Yet, reported in the People’s Daily, the Ministry of Commerce has commented on how the government has made efforts to improve FDI policies and is continuously looking for new ways to further improve their policies
“Currently, China’s FDI policies have already had an complete framework, and are fair and impartial,” said Yao Jian. “However, they need adjustment and optimization to better support the country’s economic restructuring and to create a resource-saving and environment-friendly society. He noted that the adjustment and optimization would focus on simplifying investment procedures. Foreign investment filing system would replace the current examination and approval system.”
It remains to be seen whether or not China is curtailing FDI, but from recent data, it seems to show that the drop in FDI was due mainly to the global financial crisis and the recent increase in FDI shows China’s increasing recovery from the crisis.
See also “China to allow foreign-invested companies to list: commerce minister ” From Xinhua news.