Robust foreign capital flows offer hopes of sustained economic growth

A photo illustration shows a $100 banknote placed above Chinese 100 yuan banknotes in Beijing in this May 10, 2013 file photo. [Photo/Agencies]

Foreign capital flows into China continued to remain on a strong perch and rose 9 percent year-on-year to 584.74 billion yuan ($92.5 billion) during the first nine months of this year, government data showed on Monday.

The figures indicate that the growth momentum seen during the first six months of the year has continued in the second half also, the Ministry of Commerce said.

According to industry experts, the growth in foreign direct investment assumes significance considering that it comes against the backdrop of some foreign companies moving, or planning to move facilities outside of China due to rising labor and operating costs. It also indicates that investors are confident about sustained growth prospects in the world's second-largest economy and the foreign investment restructuring.

"Rising costs have made China a less appealing destination for some foreign companies, which used to consider the nation as a major manufacturing and processing destination," said Tu Xinquan, deputy head of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.

"However, as a big market with about 1.36 billion consumers with rising purchasing and consumption power, it is still an attractive investment destination for goods, services and technical solution providers from abroad."

Companies from the services industry have increased their investment in China, said Tu.

Wang Shouwen, vice-minister of commerce, said earlier in July that the services industry has become the country's main engine to attract FDI, as "companies from the United States, Europe and Singapore, eager to diversify their investments, are looking to the sector, especially the services outsourcing businesses".

FDI into China's services industry increased by 23.6 percent year-on-year in the first half, accounting for 63.5 percent of total FDI during the period, while the FDI into China witnessed a 9.2 percent year-on-year growth to 525.28 billion yuan through the first eight months of this year, figures from the ministry showed.

Foreign direct investment in China's agriculture and forestry sectors by investors from countries along the Belt and Road Initiative surged 2,171 percent and 1,137 percent year-on-year, respectively, in August, the ministry said. The initiative meant to improve infrastructure connectivity among the countries along the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

Shen Danyang, the ministry's spokesman, said the initiative will prove a flexible platform for inbound investment by foreign firms.

"The stable growth in revenue creates a better business environment in the country and the strong rebound in China's capacity is certain to attract more foreign investment," Tu said.