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Foreign investment drop narrowing
By Zhang Fengming |
April 15, 2009, Wednesday
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Online Edition
Online Edition
FOREIGN direct investment in China fell for the sixth month in March but with the drop narrowing, the Ministry of Commerce said today.
The narrowing FDI decrease encourages hopes for recovery, but economist said it is too early to conclude that investors' interest in the Chinese market has returned.
Investment dropped 9.5 percent to US$8.4 billion in March from a year ago, the ministry said at a briefing today in Beijing. That compares with a 15.8 percent decline in February, and a 32.6 percent tumble in January. For the first quarter, foreign spending fell 20.6 percent to US$21.8 billion.
"The year-on-year decline in China's foreign direct investment inflows has been narrowing," said Sherman Chan, a Moody's Economy.com economist, today. "Any indication that the Chinese economy is still growing at a robust pace despite a severe global downturn will help boost the mainland's appeal to international investors."
"Meanwhile, some foreign businesses may also try to take advantage of an expected rise in domestic demand in China as the giant fiscal stimulus package is rolled out."
Premier Wen Jiabao said on Saturday that China's economy showed "better than expected positive changes in the first quarter" due to the government's huge stimulus plan.
China announced a 4-trillion-yuan (US$586 billion) stimulus package in November and has increased tax rebates, subsidized the rural economy and thawed liquidity to revive economic growth.
Some economic indicators have showed that China's economy may have bottomed out, but economists said it is still too early to cheer as China's robust recovery isn't likely without the recovery of the global economy.
"The decline in China's FDI inflows may continue to narrow through the year, but an annual increase, while possible, remains a major challenge,"Chan said.
Moreover, the gradual"improvement"of the year-on-year result in March could be attributed to the exceptionally high base set at the start of 2008, in January in particular, Chan added.
Lu Zhengwei, Industrial Bank's chief economist, echoed the view, saying that foreign spending will continue to drop in the coming months as multinationals face a continued credit crunch and a deeper world recession.
China is the rare major economy which has fended off a recession during the worst financial crisis since the Great Depression. The World Bank and the International Monetary Fund both forecast a global economic decrease this year, the first drop since World War II.
China is not immune from the hit though it has shown resistance to the slowdown.
China's March Purchasing Manager Index rose into expansionary territory for the first time in six months. The PMI, the indicator of activity in the manufacturing sector, rose to 52.4 in March, the highest level in 10 months, from 49 in February. An above-50 reading indicates expansion while a below-50 reading indicates contraction.
China's banks extended 1.89 trillion yuan in local currency-denominated loans in March, bringing the first quarter's total to 4.58 trillion yuan and nearing the central government's full-year target of at least 5 trillion yuan.
The narrowing FDI decrease encourages hopes for recovery, but economist said it is too early to conclude that investors' interest in the Chinese market has returned.
Investment dropped 9.5 percent to US$8.4 billion in March from a year ago, the ministry said at a briefing today in Beijing. That compares with a 15.8 percent decline in February, and a 32.6 percent tumble in January. For the first quarter, foreign spending fell 20.6 percent to US$21.8 billion.
"The year-on-year decline in China's foreign direct investment inflows has been narrowing," said Sherman Chan, a Moody's Economy.com economist, today. "Any indication that the Chinese economy is still growing at a robust pace despite a severe global downturn will help boost the mainland's appeal to international investors."
"Meanwhile, some foreign businesses may also try to take advantage of an expected rise in domestic demand in China as the giant fiscal stimulus package is rolled out."
Premier Wen Jiabao said on Saturday that China's economy showed "better than expected positive changes in the first quarter" due to the government's huge stimulus plan.
China announced a 4-trillion-yuan (US$586 billion) stimulus package in November and has increased tax rebates, subsidized the rural economy and thawed liquidity to revive economic growth.
Some economic indicators have showed that China's economy may have bottomed out, but economists said it is still too early to cheer as China's robust recovery isn't likely without the recovery of the global economy.
"The decline in China's FDI inflows may continue to narrow through the year, but an annual increase, while possible, remains a major challenge,"Chan said.
Moreover, the gradual"improvement"of the year-on-year result in March could be attributed to the exceptionally high base set at the start of 2008, in January in particular, Chan added.
Lu Zhengwei, Industrial Bank's chief economist, echoed the view, saying that foreign spending will continue to drop in the coming months as multinationals face a continued credit crunch and a deeper world recession.
China is the rare major economy which has fended off a recession during the worst financial crisis since the Great Depression. The World Bank and the International Monetary Fund both forecast a global economic decrease this year, the first drop since World War II.
China is not immune from the hit though it has shown resistance to the slowdown.
China's March Purchasing Manager Index rose into expansionary territory for the first time in six months. The PMI, the indicator of activity in the manufacturing sector, rose to 52.4 in March, the highest level in 10 months, from 49 in February. An above-50 reading indicates expansion while a below-50 reading indicates contraction.
China's banks extended 1.89 trillion yuan in local currency-denominated loans in March, bringing the first quarter's total to 4.58 trillion yuan and nearing the central government's full-year target of at least 5 trillion yuan.
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