FDI increase positive sign

Despite market speculation that there would be an exodus of foreign capital from China as a result of its economic deceleration, an appreciable surge in the non-financial foreign direct investment in the first two quarters is proof of China's continuing appeal to overseas investors.

According to data released by the Ministry of Commerce on Wednesday, the FDI that flowed to China amounted to $61.98 billion in the first half of this year, an increase of 4.9 percent from a year earlier. June, in particular, saw an inflow of $14.39 billion, an increase of 20.12 percent year-on-year, nearly 20 percentage points higher than the May growth, which was 0.29 percent.

The June growth marked the fifth consecutive monthly increase since February, when China reversed a negative FDI momentum that had started in June last year.

At a time of weak growth in exports and consumption, the FDI resurgence is a precious sign of overseas investor confidence in the world's second-largest economy, although it has been on a slowing trajectory for months.

Also encouraging is the faster growth in investment from China's major economic partners in the first half of this year. The European Union's jumped by 14.68 percent year-on-year, the United States' by 12.29 and Japan's by 14.37 percent.

Compared with a 12.43 percent increase in the FDI that flowed to its service sector, a 2.14 percent decline in the actual foreign capital absorbed by the country's manufacturers is evidence that overseas investors have a dampened outlook on China's manufacturing, which is grappling with overproduction.

Undoubtedly, a rise in FDI inflows has largely resulted from the authorities' efforts to improve the domestic environment for foreign investors. In May, the State Administration of Foreign Exchange promulgated a regulation, simplifying foreign investment registration and other approval procedures. The central government's nod to a new free trade zone will also create a magnet for foreign investment.

A 20.12 percent FDI increase in June does not necessarily mean the irreversible warming-up of the country's inward FDI prospect. At a time when there is no immediate ways to expand exports and consumption, the country should take full advantage of foreign capital to help stabilize the economy.

(China Daily 07/18/2013 page8)