China's FDI drops for third month
CHINA'S year-to-date foreign direct investment (FDI) inflows declined for a third month in September, indicating that investors remained cautious amid a further slowdown in the world's second-largest economy.
Investment last month rose from a year earlier, however, after a sharp drop in August, though economists cautioned against reading too much into single-month data, which can be highly volatile.
Last month, China attracted US$9 billion (S$11.4 billion) in FDI, up 1.9 per cent from a year earlier, the Commerce Ministry said yesterday. That compared with a 14 per cent slide in August to US$7.2 billion, a level not seen since February 2012.
That left China with US$87.4 billion of FDI in the first nine months of this year, down 1.4 per cent from a year earlier. "Under the circumstances of no big fluctuations in the global and domestic situations, we expect China's FDI to keep its stable path this year," ministry spokesman Shen Danyang told reporters at a monthly media briefing.
FDI is an important gauge of the health of the external economy, to which China's vast factory sector is oriented, but it is a small contributor to overall capital flows compared with exports, which were worth about US$2 trillion last year.
Mr Shen said last month that China's FDI may hit an all-time high of US$120 billion this year, barring no sharp changes in global capital flows.
The investment data came as China's trade sector showed surprisingly strong performance last month, easing concerns about the risk of a sharper slowdown, though some economists suspected that the export figures may have been inflated by speculative over-invoicing activities, as they were earlier in the year.
Mr Shen said strong exports last month were normal, but added that the ministry will monitor flows to Hong Kong.
"We've noticed that exports of individual products from some regions to Hong Kong surged in September. We will enhance oversight with related departments," he said.
Beijing has struggled to prevent currency speculators from using simulated trade between Hong Kong and bonded customs zones using metals or lightweight items, such as integrated circuits, to get more yuan on hand, circumventing controls on capital flows.
Such flows have been repeatedly blamed for producing mysterious spikes in exports even while trade with other Asian neighbours has fallen.
China's service sector attracted US$48.6 billion of FDI in the first nine months of the year, up 8.7 per cent from the same period last year, and faring much better than the manufacturing industry, where FDI dropped 16.5 per cent to US$29.6 billion.
The service sector appears to be holding up relatively well despite the cooling economy, while manufacturing has been weighed down by erratic exports, excess capacity in some sectors and a slumping property market, which is hurting demand for everything from glass and furniture to cement and steel.
Among the 10 countries that were the biggest sources of China's FDI, investment from South Korea surged 32.5 per cent on an annual basis, while that from Britain leapt 32.3 per cent.
In contrast, investment from Japan plunged 43 per cent from a year earlier, while FDI from the United States and the European Union dropped 24.7 per cent and 18.8 per cent, respectively.
China's non-financial direct outbound investment rose 21.6 per cent in the first nine months from a year earlier to US$75 billion.