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FDI in Shanghai dives 37%

SHANGHAI'S foreign direct investment tumbled 37.4 percent in May from a year earlier to US$1 billion, a bigger margin compared to the fall of 18.3 percent in April, the Shanghai Statistics Bureau said yesterday.

The decline reinforced that the global economic climate is still tough, which also led to a drop in Shanghai's exports, which tumbled 29.7 percent year on year last month, following a fall of 26.2 percent in April.

"Both figures (referring to the city's FDI and exports) in May demonstrate the gloomy conditions in the world economy and the weak external demand," said Wang Zehua, an analyst with the bureau. "Despite there being some good news indicating a recovery, investors seem to be very cautious and still prefer to keep money in their own markets."

But views have been expressed that the rising costs of investment in Shanghai were blamed for the city's bigger drop in FDI compared with other areas in the mainland.

"Shanghai provides better infrastructure and better environment for investment, and naturally at higher costs compared with other areas," said Xia Minren, an analyst at China Securities Co. "At a time when investors tighten their belt amid the global downturn, it is understandable that Shanghai sees a sharper fall in FDI."

The number of FDI projects in Shanghai shrank 20.7 percent from a year earlier to 256 projects in May, said the bureau.

In contrast to the wider drop in FDI in Shanghai, the decline in FDI in China narrowed to 17.8 percent in May from April's 22.5 percent.


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