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November 17, 2009

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Home » Business » Economy

FDI in China keeps climbing

FOREIGN direct investments in China posted a third consecutive monthly increase when they rose 5.7 percent in October from a year ago, riding on a recovering domestic economy, the Ministry of Commerce said yesterday.

China attracted US$7.1 billion of FDI but the October growth lagged the expansion of 18.9 percent in September and 7 percent in August, the ministry said.

"Although the October growth is slower than the September figure, the third consecutive month of year-on-year gains suggests that investment is picking up," said Alaistair Chan, associate economist with Moody's, yesterday. "The rise in investment flows is the result of a recovering economy."

China's economy expanded 8.9 percent year on year in the third quarter, up from the rise of 7.9 percent in the second quarter and 6.1 percent in the first three months of the year. Earlier this month, the World Bank raised its forecast for China's economic growth this year to 8.4 percent from 7.2 percent.

"While the bulk of the foreign investment is due to expectations the Chinese economy will outperform the global economy in the medium term, some may be due to speculative capital flowing in on hopes for a stronger currency," said Chan.

The yuan has been almost flat at 6.83 against the United States dollar since the middle of August 2008. The currency is showing some signs of an early and gradual appreciation as it traded at around 6.827 yesterday in Shanghai.

Economists said they expect the yuan to resume its rise, which stopped due to the global financial crisis, as early as the first quarter of next year. The yuan has risen about 20 percent since it was depegged from the greenback in July 2005.

In the first 10 months of this year, FDI tumbled 12.6 percent annually to US$70.8 billion.


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