China suffers its tenth straight monthly fall in foreign direct investment

Yao Jian, a spokesman for the Ministry of Commerce, said on Monday that China suffered its tenth straight monthly fall in foreign direct investment. FDI inflows dropped 35.7 % in July from a year earlier to $US5.36 billion, much steeper than June`s 6.8 % fall. But the country the country sees good news ahead on the export front.

Inflows have weakened in recent months in the wake of the global financial crisis, the first faltering in a surge that followed China's accession to the World Trade Organisation in 2001. In the first seven months FDI fell 20.3 % from a year earlier to $48.3 billion. However, Yao told a regular monthly news conference that China was doing better than many other countries in luring FDI and he remained confident that China would keep attracting investors. Besides, Yao was optimistic about China's export outlook, saying: "We think the fall in our exports will narrow in the second half, and there's even a possibility it will grow in some months due to the low base last year after the global financial crisis."

Last Tuesday, the government said that exports dropped 23.0 % in July from a year earlier, and imports were down 14.9 %. However, after adjusting for the number of working days, exports rose 5.2 % from June and imports rose 3.5 %. Zhong Shan, a vice commerce minister, said China would not relax its efforts to help domestic exporters. But Beijing would also try to narrow the country's trade surplus by expanding imports of energy and resource products to build up state reserves, Zhong wrote in the official Seek Truth magazine.

In addition, Zhong said that China would encourage local firms to set up production in other countries to help reduce the balance of payments surplus. With global trade slumping, China is experiencing growing friction with its big trading partners, particularly India and the United States. There were 60 anti-dumping cases targeting China in the first half, up 11 % from a year earlier, Yao added.

Yao also added that in order to shield domestic companies from anti-dumping actions, China needed other countries to grant it market economy status. He criticised as inappropriate the European Union's decision to use Turkey - which has a much higher standard of living than China - as a comparator in its anti-dumping investigation against Chinese aluminium road wheels. If the EU recognised China as a market economy, it would use China's actual production costs in probing such anti-dumping claims, not those of a third country like Turkey.