F REIGN TRADE - 中国国际贸易促进委员会

Domestic reasons“Two factors have contributed to the continuousnegative growth of FDI”, said Shen Danyang,spokesman of the Ministry of Commerce, at aroutine press conference on May 15. One the onehand, the growth of the world economy has becomesluggish, exerting heavy impacts on the global FDI.According to a report issued by the trade and developmentcouncil of the UN, the scale of Greenfieldinvestment and transnational M&A have becomedropped during the first quarter this year, loweringglobal expectations about the FDI prospects. On theother hand, the U.S. and European countries haveencouraged the return of industries and some developingcountries have adopted more favorable investmentinviting policies, increasing the FDI competitions.If we explore further by industry, the manufacturingindustry in absorbing FDI in April experiencedthe largest drop, down by 4.4%, according toMinistry of Commerce. Also, the FDI of service industryand agricultural, forest, husbandry and fishingindustry have dropped by 3.1% and 0.9% respectively.If we look at the data by region, the FDI of China’swest region and east region have dropped by 15.2%and 2.5% respectively.To compound the situation, the rising of factorcosts of China have weakened its advantages inoperational costs. Bai Ming, deputy director of theinternational market research department of theMinistry of Commerce, said that “besides the Europeandebt crisis and other negative external factors,the Chinese economic adjustment has also loweredthe investment willingness.” According to up-to-datedata provided by the National Bureau of Statistics,the PPI (Producer Price Index) has dropped by0.7% on a year-on-year basis, showing the economicslump to the bottom.Also, the structure and quality of FDI, ratherthan its pure scale, have been given more and moreattention. “In many regions it is not about invitingforeign investment, but selecting the right investment,which may also impact the scale of foreigninvestments,” Shen said.Li Zhongzhou, a WTO expert, remarked thatbesides the above-mentioned reasons, the controland management of domestic real estate market haveconstitute another important reason for the shrinkingFDI. Data shows that the real estate industry hasaccounted for 25% in terms of paid-in foreign investment,while the control of the real estate market haslowered the paid-investment of real estate market forthe first quarter by 6.3%.Teng Tai, chief economist of Minsheng Securities,said that the quality has replaced scale as themost calculated factor in attracting FDI. The Chinesepeople have paid more attention to the productionand management technology when inviting theforeign investment, while some foreign companiesare unwilling to see the technological transfer, whichwill lower the amount of investment. Also, the competitiveadvantage in labor costs, less favorable FDIpolicies, and a more intense focus on environmentalprotection in China have pushed the adjustment offoreign investment structure, during which the FDIscale will naturally.External reasonsAccording to Xinhuanet.com, the re-Why FDI Falling Down?By Alice Yang9