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China’s 2012 FDI inflows slow, but $100 bn on cards

Nov 21 2012, 03:48 IST
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SummaryChina’s foreign direct investment is on track to top $100 billion in 2012 even as the longest run of year-on-year declines in inflows since 2009 extended into October, dragged down by an uncertain outlook for corporate spending as global trade sags.

China’s foreign direct investment is on track to top $100 billion in 2012 even as the longest run of year-on-year declines in inflows since 2009 extended into October, dragged down by an uncertain outlook for corporate spending as global trade sags.

The commerce ministry said on Tuesday that China drew $91.7 billion in foreign direct investment between January and October, down 3.45% on the same period a year ago, marking the 10th month that aggregate year-to-date flows fell compared with the previous period.

“We can see that there are still many uncertain factors weighing on the global economy and the most severe aspect is the weak world demand,” commerce ministry spokesman Shen Danyang told a news conference.

China's economy is acutely sensitive to external demand, despite a gradual rebalancing towards domestic consumption.

Total exports were worth about 31% of GDP in 2011, according to World Bank data, and an estimated 200 million Chinese jobs are in the export sector or supported directly by foreign investment, making FDI a particularly important gauge of prospects for China’s vast factory sector.

Despite the slowing rate of inflow, China remains firmly on course to secure more than $100 billion of FDI for the third successive year, according to data from the United Nations Conference on Trade and Development, which collates FDI statistics globally.

The FDI figure follows a raft of other economic indicators for October, ranging from exports to factory output and investment, that pointed to a recovery in the world’s second-largest economy gaining pace.

China’s October export growth darted to a five-month high above 11%, surpassing the forecasts of economists in the benchmark Reuters poll, but analysts and officials alike are wary of over-interpretation of the strength of the trade bounce.

“We must say that it is very difficult to achieve the 10% annual target for trade growth this year,” Shen said.

Data from China's Customs Administration showed total trade expanded by 6.3% in the first 10 months of 2012 from year ago levels.

“One thing is for certain — we will spare no effort to continue to stabilise growth in exports and imports. Apart from that, we will pay particular attention to increasing China’s share of global trade,” Shen said.

“We expect China's share of total global trade to rise further this year from last year’s 10.4%,” he added.

To shield the economy from external uncertainties, Beijing has unveiled a slew of measures to help reduce the burden on exporters and importers, such as

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