China's FDI flows decline amid economic slowdown

Foreign direct investment (FDI) into China declined by 1.47 per cent in March to USD 12.24 billion, the first drop in over a year, as its economy showed signs of slowing down.
The volume for the first quarter of 2014 came in at USD 31.55 billion, an increase of 5.5 per cent from a year earlier, the Ministry of Commerce (MOC) said today.
Attributing the fluctuation to changes in individual investment projects and macro economic policies such as the recent yuan volatility, a ministry spokeperson said that The March drop was normal.
"The fluctuation won't affect the steady growth of foreign investments for the whole year," while China will remain a very important investment destination for global investors," the ministry said.

Significantly much of the FDI flows went into services sectors instead of manufacturing which was Chinese economy's mainstay for long.
Around 55.13 per cent of FDI went into the country's service sector, state run Xinhua news agency reported.

In the first quarter, FDI from major Asian economies saw steady growth, including a 7.84-per cent rise from ASEAN nations and a 162.13-per cent surge from Korea.
However, investment from Japan shed 47.18 per cent, while that form the United States and the European Union fell 1.91 per cent and 24.52 per cent, respectively.
China's outbound direct investment by non-financial firms dropped 16.5 per cent to USD 19.9 billion in the first quarter, the ministry said.

The data came as foreign investors are facing an increasingly tricky landscape in China, with the country's growth slowing and production costs rising because of a shrinking labour force.
Official data showed that China's growth slowed to 7.4 per cent in the first three months, the lowest pace since the third quarter of 2012.
Beneath the headline number are China's painful efforts to gradually shift away from export-driven growth, which brought pressure to bear on foreign manufacturing businesses that once rode on China's cheap labour and land.
"China's trade and foreign investment data showed China's economy is undergoing a transformation as the era characterised by a lack of foreign exchange, capital and commodities is over," said Zhang Yansheng, secretary-general of the academic committee at the National Development and Reform Commission.

Jiang Yuechun, an analyst with the China Institute of International Studies, said the rising labour costs and economic restructuring may lead to the exit of some foreign capital that relied heavily on the cheap labour and raw materials, but those that eyed high-end products and industries will remain competitive.