China FDI up 5.2% in July on year on mergers, acquisitions

Foreign investment into China rose 5.2 percent in July compared to the previous year, largely on the back of mergers and acquisitions by overseas firms, the commerce ministry said on Wednesday.

Overall foreign direct investment (FDI), which excludes financial sectors, was $8.22 billion last month, the ministry said, and $76.63 billion in the first seven months of the year, a 7.9 percent increase.

"The amount and the proportion of foreign capital mergers and acquisitions rose sharply between January and July," it said in a statement.

The proportion of M&A activity in FDI rose to 18.2 percent in the January-July period, it added, up from 4.6 percent in the same seven months a year ago.

China's outbound overseas direct investment (ODI) last month was $7.5 billion, a sharp decline of 18.6 percent compared to a year earlier and the second consecutive monthly fall after one of 15.5 percent in June, the ministry said.
Commerce ministry spokesman Shen Danyang attributed the drops to a high comparative base.

"There were several big-ticket ODI projects in June and July last year," he told reporters, adding that there were no similarly large deals in those months this year.

"Many ODI projects were in the energy and oil sectors in the past," he added. "Investors this year have been taking a wait-and-see stance due to the slumps in prices of oil and minerals and other international commodities."

Full year ODI growth is still expected to be 10-15 percent or "even higher", he said.

ODI in the January-July period rose 20.8 percent year-on-year to $63.5 billion.

FDI growth has slowed in recent years owing to factors including rising costs, competition from Southeast Asian countries, and concerns over official investigations into foreign companies.

- ODI passes $100 bn -

China drew a total of $119.6 billion of FDI in 2014, up 1.7 percent, while ODI was up 14.1 percent at $102.9 billion, passing the $100 billion mark for the first time.
In the January-July period, investment from the 28-member European Union (EU) into China rose 18.4 percent to $4.53 billion, the ministry said.

Investment from France, which is included in the EU total, rose 78.6 percent to $810 million. From Japan, with which China is in disputes over territory and wartime history, it fell 24.2 percent to $2.14 billion.

And it fell sharply from the United States, dropping 29.2 percent to $1.28 billion, the figures showed.

Hong Kong is by far the biggest investor in China, accounting for $56.52 billion of the seven-month total. It showed a gain of 14.5 percent during the period.

At the same time China's acquisition of foreign assets, particularly energy and resources, has increased with firms encouraged to invest abroad to gain market access and international experience.

Outbound investment from China into the US rose 35.8 percent, while investment into the EU fell 36.1 percent, the ministry said, without giving totals.

The ASEAN group of Southeast Asian countries saw investment from China rise by 57.6 percent, the ministry said, while that to Hong Kong soared 118.7 percent.

The world's second-biggest economy expanded 7.4 percent last year, the weakest pace since 1990, and slowed further to 7.0 percent in each of the first two quarters this year.