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FDI feeling impact of financial crisis

By Diao Ying (China Daily)
Updated: 2008-10-11 08:29

The global financial crisis has taken its toll on foreign direct investment (FDI) to China, with the rate of growth starting to slow down.

FDI in China rose 39.9 percent year-on-year in the first nine months of 2008, and spending by overseas companies increased to $74.4 billion, the Ministry of Commerce said on Friday on its website.

But FDI for September was only $6.64 billion, compared to the monthly average of about $8.3 billion so far this year.

The latest figures also suggest a slowdown in the FDI growth rate, which was 45.6 percent for the first half of this year, according to the Ministry of Commerce.

Experts said the situation shows the impact of the global financial crisis on FDI has started to become clearer, after global stock markets have gone into free-fall.

"As the US and EU economies suffer, international capital will pull out of the emerging markets and go back to their home countries," said Gene Ma, a macroeconomic analyst at China Economic Business Monitor.

Ma said that the capital inflow to emerging markets like China would continue to be difficult given the turbulence in the international market.

A UN report released last month suggested that FDI across the world would drop 10 percent from last year's record high because major companies are scaling back their investment plans.

But a survey by the UN Conference on Trade and Development (UNCTAD) revealed that China is seen as the most attractive destination for investment because of its strong economic growth and improved investment environment.

China has maintained economic growth of more than 10 percent for five consecutive years. The International Monetary Fund earlier this week forecast a 9.3 percent expansion for the world's fourth-biggest economy next year even as the world teeters on the brink of recession.