Foreign Investment in China Plunges in January

Foreign investment use has seen consecutive falls in China since October, when a 2.02-percent annual drop was recorded.

Yao Jian, an MOC spokesman, attributed the January decline to the global financial crisis and an unusually high level in the same month of last year.

The week-long Chinese New Year holiday in late January also affected the monthly foreign investment figure, he said at a press conference.

The slump in January was slightly slower than the 36.52-percent decrease in November, but the whole-year situation would still be grim, said Zhang Yansheng, head of the International Economic Research Institute under the National Development and Reform Commission.

"Foreign investors are withholding their money because of the spreading global financial crisis," said Zhang. "China won't be an exception in this downturn."

    

 

The upward trend would experience a turning point this year even without the global financial crisis, as China's adjustment to its foreign investment policies took effect, said Zhang.

The Chinese government has tried to adjust the structure of foreign investment use, which accounts for more than half of China's exports, to upgrade its export sector.

Measures taken included raising labor costs, reducing or scrapping tax rebates on some resource and energy-intensive exports and allowing its currency to appreciate more than 20 percent.

Even without the global financial crisis, the growth in foreign investment use would slow down this year with less input in the manufacturing sector, said Zhang.

However, the unexpected world economic downturn would only "rub salt into the wound", while sharply lower foreign investment would further impact China's industrial output and exports, he said.

Foreign investment use in January was around the average monthly level in 2008 and higher than the average monthly investment of 6.17 billion U.S. dollars since September, said Yao.

He predicted foreign investment to maintain a stable growth this year as China improves legal and government services for investors and the process of urbanization speeds up.

China approved the establishment of 1,496 foreign-funded companies in January, down 48.73 percent from the same period last year, Yao said.