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China's FDI takes a dip for fifth straight month

CHINA attracted US$5.83 billion in foreign direct investment last month, down 15.8 percent from a year ago and the fifth straight monthly decline, the Ministry of Commerce reported yesterday.

The figure did improve from January's drop of 32.7 percent, however, ministry spokesman Yao Jian said, adding that China remains an attractive investment spot for multinational companies despite the global downturn.

In the first two months, foreign firms invested US$13.37 billion in China, down 26.2 percent from the same period last year. The combined data cancel out the effects of the Spring Festival holiday, which fell in January this year and in February last year.

"Although the double-digit decline was downbeat, it was in line with expectations," Moody's economist Sherman Chan said. "Multinational companies are holding back on investment because of risk aversion, capital constraints and tight access to credit."

Globally, foreign direct investment is likely to drop further this year after falling 21 percent in 2008, the United Nations estimated.

"But we also see that China is still relatively attractive to FDI inflow," given its stable economic growth, cheap labor costs and massive, open market, Yao told a briefing in Beijing.

Red tape eased

China has adopted a series of measures since the start of the financial crisis to expand domestic demand and maintain stable exports, helping to shore up foreign-investor confidence.

Last week China eased investment rules for foreign firms by giving local governments authority to approve investments worth up to US$100 million without seeking ministry-level vetting in a bid to revive FDI inflow.

Yao also said the ministry will make things easier for domestic companies to invest overseas, as more outbound investment would also contribute to domestic economic growth in the context of the financial downturn and help improve China's balance of payments.

China's overseas investments nearly doubled in 2008 to US$52.15 billion, including financial sector investment, the ministry said. A flurry of deals has resulted, many in the resource sector as China takes advantage of lower commodity prices to secure future supply.

In addition, the country will send more business missions abroad this year to look for investment opportunities following a trip last month to Europe, according to the commerce ministry.

"There will be several more tours on technology corporation and investment to go abroad this year," Yao said.

Yao said he did not know the details on where the missions would go, but he did indicate they would probably visit Europe, the United States, Japan and Southeast Asia.

China sent a 200-member group of businesspeople and officials to Europe in February on a four-nation buying tour that signed contracts worth more than US$13 billion.


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