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Shanghai's FDI takes another tumble

SHANGHAI'S foreign direct investment fell 37.4 percent from a year earlier in May to US$1.003 billion, deteriorating from the fall of 18.3 percent in April, said the Shanghai Statistics Bureau today.

The plunge of the FDI reinforced a tough global economic climate, which also led to a freefall for Shanghai's exports, which tumbled 29.7 percent year on year last month, following a drop 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. Despite the fact that there has been some good news indicating a recovery, investors seem to be very cautious and still prefer to keep money in their own markets," said Wang Zehua, an analyst with the bureau.

Some blamed the rising costs of investment in Shanghai for the city's bigger drop in FDI compared with other areas in the mainland.

"Shanghai provides a better infrastructure and a better environment for investment, but naturally, at a higher cost compared with other areas. In a time when investors are tightening their belts amid the global economic woes, it is understandable that Shanghai sees a sharper fall in FDI," said Xia Minren, an analyst at China Securities Co.

In contrast to the widening fall of the FDI in Shanghai, the contraction of China's FDI narrowed to 17.8 percent in May from April's 22.5 percent.

Xia said the city did not need to worry too much and should continue to enhance its advantages to attract investment in service industries and advanced technology which create more value and are more eco-friendly.

The number of foreign direct investment contracts in Shanghai retreated 20.7 percent from a year earlier to 256 projects in May, said the bureau.

Of these, 231 projects belonged to the service sector and were worth US$645 million, accounting for 64.3 percent of the total.


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