Foreign direct investment in China rises 5 per cent

China drew $40.3 billion in foreign direct investment (FDI) in the first four months of 2014, up 5 per cent from a year earlier, with the lion's share going to the services industry, the Commerce Ministry said on Friday.

In April alone, China attracted $8.7 billion in FDI, up 3.4 per cent from a year ago. But reflecting uncertainty over the global economy, China’s non-financial direct outbound investment fell 12.9 per cent to $25.7 billion in the first four months.

The services sector attracted $22.5 billion in investment in the four months, up 19.1 per cent year-on-year, while investment inflows into the manufacturing sector dropped 11.4 per cent to $14.5 billion.

Hong Kong was the top investor in China in the January-April period, putting in $27.8 billion, followed by Singapore and Taiwan with $2 billion each.

Investment from South Korea rose at the quickest pace in the first four months, surging 138.5 per cent from a year ago to $1.8 billion. FDI from Japan fell 46.8 per cent from a year earlier to $1.6 billion and investment from the U.S. dropped 11.4 per cent to $1.2 billion.

The government wants to attract FDI to services, high-end manufacturing, and environmental industries instead of into low-value factories, and wants local firms to increase offshore investment.

In the first four months, 66.5 per cent of China’s outbound non-financial investment went to seven economies: Hong Kong, ASEAN, the EU, Australia, the US, Russia and Japan. Investment into the seven totalled $17.1 billion.

Separately, the ministry said that it was confident China could achieve its target of 7.5 per cent growth in total trade this year, and it maintained a “cautiously optimistic view on the trade performance this year”.

China announced on Thursday it was increasing its support for the trade sector with a raft of new measures, including giving more tax breaks, credit insurance and currency hedging options to exporters.

But the ministry denied that China was weakening the yuan currency to boost trade, saying that the currency’s moves were decided by market supply and demand.

The yuan is a perennial lighting rod issue between China and its trade partners, who have in the past accused Beijing of deliberately holding down the currency to lift exports. China has always denied these accusations.

Reuters