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China remains a magnet for FDI

China Daily, August 17, 2011

China's foreign direct investment (FDI) rose by 18.57 percent year on year to $69.19 billion in the seven months of this year, the Ministry of Commerce said Tuesday.

China remains an attractive destination for foreign direct investment (FDI) despite a decline last month, experts said.

FDI fell to $8.3 billion, with year-on-year growth of 19.8 percent, the Ministry of Commerce said on Tuesday.

"The monthly FDI figure is relatively volatile and a decline does not mean anything substantial," said Zhang Zhiwei, chief China economist of Nomura Holdings Inc.

Compared with other emerging economies, China remains competitive in attracting investment and FDI inflows should be positive for the full year, he said.

Emerging industries in China will be a new engine for economic growth and attract more capital inflows, analysts said.

With support policies for the strategic emerging industries to be launched during the second half, foreign investment in manufacturing will continue to grow, said Luo Jun, chief executive officer of the Asian Manufacturing Association.

China has designated industries such as energy conservation and environmental protection, new information technology, advanced equipment and new energy as the keys to sustainable growth.

"The development of emerging industries will spark a new round of foreign investment, as these sectors offer golden opportunities that foreign investors can't pass up," Luo said.

China is also revising its guidelines for foreign investment to expand market access for overseas companies. These guidelines are expected to be announced in the coming months.

FDI jumped 18.6 percent year-on-year in the first seven months to $69.2 billion. Foreign investors set up about 15,600 new companies during the period, up 7.89 percent.

The Ministry of Commerce didn't give detailed information on FDI for July.

During the first half, however, FDI from the US contracted 22.32 percent year-on-year.

"Signs of US economic weakness mounted in the past few months. Both the negative outlook for the US economy and the decelerating PMI have contributed to the decline in investment from the US," said Zhang.

According to the Institute for Supply Management, the US Purchasing Managers Index (PMI) fell from 55.3 percent in June to 50.9 percent in July.

"Many US firms are facing financial difficulties due to the turbulent financial market in the US and that has affected their investment in overseas markets, including China," said Li Zhongmin, an investment researcher with the Chinese Academy of Social Sciences.

But the discouraging prospects for economic recovery in the US and Europe will make the growing Chinese market more appealing to investors from those areas, he said.

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