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February 17, 2017

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Holiday effect hits FDI and ODI in January

CHINA’S foreign direct investment and outbound direct investment both fell in January due to a high comparison base and holiday effect, the Ministry of Commerce said yesterday.

China’s FDI dropped 9.2 percent year on year in January to 80.1 billion yuan (US$11.7 billion) as the weeklong Spring Festival holiday fell earlier this year in January but was in February last year, the ministry said. The amount was also lower than December’s 81.42 billion yuan.

In January, 2,010 new foreign companies were established, slightly up by 0.1 percent from a year earlier.

“The January data don’t necessarily represent the whole year trend of FDI,” said ministry spokesman Sun Jiwen, adding that China’s annual economic growth is likely to be above 6.5 percent during the 2016-2020 period, which will keep attracting foreign capital.

Last year, FDI in China increased 4.1 percent to 813.22 billion yuan.

China has pledged to further open up its economy to foreign investors, even in previously restricted industries.

Despite the overall FDI decline last month, investment inflow to the high-tech manufacturing sector surged 39.9 percent, in sharp contrast to the 9.5 percent drop in the whole manufacturing industry.

FDI in the high-tech service sector also registered an increase of 11 percent, compared with a decline of 9.3 percent for investment in service industry.

Strong growth in the high-tech sector was in line with the direction of China’s industrial upgrading, Sun said.

January’s non-financial ODI dived 35.7 percent to 53.3 billion yuan largely due to falling property purchases, according to the ministry.

Sun said policies to support legitimate outbound investment will not change and “the overall structure is improving.”

Investment in overseas manufacturing and information technology sectors rose 79.4 percent and 33.1 percent respectively, the ministry said.

Investment in offshore property fell sharply by 84.3 percent, and capital injection in cultural, sports and entertainment industries plunged 93.9 percent.

DTZ/Cushman & Wakefield expects the deal volume of China’s outbound property investment to drop slightly in 2017. It estimates Chinese investment in overseas commercial real estate alone reached a record US$38.3 billion last year.

And Chinese interest in overseas property remains strong, said Jan Kot, the head of China at property portal, which saw an over 90 percent jump in inquiries on its website in January from a year earlier.

But authorities have warned they would pay close attention to “irrational” investment in property, entertainment, sports and other sectors.

Last year, China’s ODI surged 44.1 percent year on year to a record high of 1.13 trillion yuan.

Chinese companies are set to continue to invest in infrastructure projects in countries along the Belt and Road routes, Sun said, as 10.6 percent of China’s non-financial ODI in January was in the Belt and Road regions.

In 2017, power, railway and health care sectors are set to surge in the countries involved in the initiative, a PwC report said on Wednesday.


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