Foreign direct investment in China boosted by ‘steady rise in service industry’

Out-Law News | 19 Dec 2014 | 9:38 am | 2 min. read

Foreign direct investment (FDI) into the Chinese mainland increased by 22.2% to $10.36 billion in November 2014, compared to the same period last year, according to the latest figures.

The increase was the result of a “continuing steady rise” of investments in the country’s service industry sector, the state-run Xinhua News Agency said, reporting figures from the Ministry of Commerce (MOC).

According to Xinhua, “growth quickened from a 1.3% rise in October and 1.9% in September”. FDI for the first 11 months of the year, excluding investment in the financial sector, reached a total of $106.24bn, an increase of 0.7% from the same period last year, Xinhua said.

Just over 55% of FDI went into the country's service sector between January and November of this year, while FDI into the manufacturing sector fell 13.3% to $35.93bn, accounting for 33.8% of the total.

Xinhua said investment from South Korea and Britain “saw fast growth”, with increases of 22.9% and 28% respectively. By contrast, investment from Japan fell by nearly 40%, followed by a 23.6% fall in investments from the Association of Southeast Asian Nations (Asean) and a 22.2% fall in investments from the US.

MOC data also showed that China's outbound direct investment by non-financial firms fell by 26.1% to $7.92bn in November, bringing the total for the first 11 months to $89.8bn, Xinhua said.

MOC spokesman Shen Danyang told Xinhua that the ministry expects the overall scale of inbound and outbound investments to be "relatively close" this year.

Xinhua said: “The stronger-than-expected FDI data came as the world's second largest economy is still facing relatively big downward pressures. Dragged down by a housing slowdown, softening domestic demand and unsteady exports, China's growth slid to a low not seen since the 2008-2009 global financial crisis in the third quarter.”

However, Xinhua said China's gross domestic output grew by 7.4% in the first three quarters of 2014.

Publication of the MOC data followed China’s announcement this month of plans to “improve the investment environment” in 2015, by boosting market access in the service sector and “further opening up manufacturing sectors”. China’s Central Economic Work Conference said activities to improve the investment climate would draw on experiences from the 29-kilometre China (Shanghai) Free Trade Zone (FTZ) that was set up in 2013.

A total of 1,016 foreign-funded projects worth $5.4bn were launched in the FTZ in the first half of this year, according to the Shanghai Commission of Commerce. The number “accounted for nearly half of all foreign-funded projects in the city and nearly 20% of projects launched in the zone”.

Last month, the National Development and Reform Commission proposed changes to China's Foreign Investment Guidance Catalogue to encourage more foreign companies to invest in the country.

New rules came into effect in China last October to ease controls on overseas investment by domestic companies. According to Xinhua, the new rules mean “only overseas investment projects in sensitive countries or regions, as well as in sensitive industries, will require approval” by authorities.