JAKARTA (TheInsiderStories) - IHS Global Insight China economist Brian Jackson provides updates and commentary on China’s utilized FDI growth. Followings are the key points:
Key Points:
- China’s utilized foreign direct investment (FDI) reached US$9.2 billion in September, having grown at a slower pace year-to-date and contracted in non-cumulative terms. Agricultural and services FDI grew at a slower pace, while industrial and construction sector FDI contracted less rapidly.
- The slowdown was concentrated in services, where FDI grew at a slower pace. Within services the largest drag relative to the prior month were real estate and information technology (IT) services. While both worsened compared to August, IT continues to grow at a triple-digit pace, while real estate services are falling at a double-digit pace. Foreign investment in retail and transportation also slowed but remained solidly double-digit.
- Within the secondary sector the improvement concentrated in construction and machinery. Overall, manufacturing investment rebounded almost solely due to stronger FDI in general purpose machinery, with construction FDI’s rebound playing a secondary supporting role. FDI flows into textiles and utilities worsened notably, while mining FDI also deteriorated to a lesser extent
OUTLOOK
FDI trends are similar to private investment trends, performing much worse in 2016 than total investment. That is because much of the investment growth this year is in sectors where government investment is dominant. Meanwhile, sectors with the greatest private and foreign access are in traditional industrial portions of the economy, where there the growth outlook is much murkier and thus investment appetite far lower.
While China has consistently voiced its intention to open up more sectors to private and foreign investment, its gradualist approach to implementation is insufficient to turn these headline FDI trends around, given over one-third of FDI is still in the declining secondary sector. (*)