FDI surge reflects confidence in China economy

Foreign direct investment (FDI) into the Chinese mainland rose 16.11 percent year on year in January to reach 10.76 billion U.S. dollars, underlining investor confidence in China's economic outlook. The growth rate marked a surge from the 3.3-percent increase in December, data from the Ministry of Commerce showed on Tuesday. "The double-digit growth provided the most solid and convincing response to doubts such as whether China still has a favorable investment environment and whether foreign investors are confident in China's economic prospects," said Shen Danyang, the ministry's spokesman. The ministry said FDI from 10 major Asian economies climbed 22.16 percent to 9.55 billion U.S. dollars, including a 37.69-percent rise from Hong Kong, and a 197.92-percent rise from the Republic of Korea. FDI from the European Union fell 41.25 percent but that from the United States posted a solid gain of 34.9 percent to reach 369 million U.S. dollars. FDI in the country's service sector gained 57.02 percent in January to a record high of 6.33 billion U.S. dollars, or 58.8 percent of the total. In contrast, manufacturing sector inflows dropped 21.69 percent to 3.47 billion U.S. dollars. With an inflow of 8.21 billion U.S. dollars, the affluent east of China continues to grab the lion's share of FDI. However, Tuesday's data showed the country's central and western regions have become increasingly attractive for foreign investors. January's inflows to the central region stood at 1.57 billion U.S. dollars, up 89.07 percent from a year earlier. The west bagged 989 million U.S. dollars, up 71.73 percent. Tuesday's data also showed more Chinese firms are investing abroad as outbound direct investment by non-financial firms increased 47.2 perent year on year in January to 7.23 billion U.S. dollars. Investment in Japan soared 500 percent in January from a year ago, with that in Russia surging 282 percent. Shen cited three factors driving the encouraging growth in foreign investment. Firstly, investors' confidence has been buoyed by the reform efforts of China's new leadership, including the transformation of the government's role in market activities and economic restructuring. In particular, the ambitious master plan unveiled in November has solidified confidence in long-term investment in China. Secondly, stable political and economic conditions, a skilled labor force, strong infrastructure support as well as streamlined government administration have made China an attractive FDI destination. Thirdly, January's FDI inflow was mainly driven by service sector growth as China opens its service industry wider. The inflow growth in the service sector was matched by a decline in agriculture and the manufacturing sector, the spokesman said, noting this change will play a positive role in China's industrial transformation and yield more economic returns. "We expect FDI to maintain a good growth momentum this year," he added. Tuesday's figures come after last year's foreign investment into China reversed a 3.7-percent fall seen in 2012 and rebounded 5.25 percent amid firming confidence in the country's growth potential.