FDI growth up for third consecutive month

Foreign direct investment in China grew for a third consecutive month in April, suggesting overseas investors' approval of the country's investment environment as its new leadership deepens economic restructuring activities.

Non-financial FDI in China in April came to $8.435 billion, up 0.4 percent from a year earlier, marking three months of growth after February reversed an eight-month slump with a rise of 6.3 percent, the Ministry of Commerce said on Thursday.

The first four months of the year saw FDI increase 1.21 percent year-on-year to $38.34 billion, while total FDI into the country in 2012 declined 3.7 percent from a year earlier to $111.72 billion.

"FDI in China is quite steady this year and is gradually picking up, which somewhat proves the competitiveness of the Chinese economy and the recognition of global investors," Commerce Ministry spokesman Shen Danyang said at a news briefing.

He added that 2013 will see steady growth of FDI as China enhances its comprehensive advantages and optimizes services for global investors.

Lian Ping, chief economist at the Bank of Communications, said FDI is flowing slowly into China as the world's second-largest economy enters a moderate growth era.

China's GDP growth in the first quarter slowed to 7.7 percent year-on-year after a rebound to 7.9 percent in the fourth quarter. Foreign institutions recently lowered their expectations for China's economic growth following weak economic data in April.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a ministry think tank, said the sluggish world economy also restrained capital flows.

"The slight FDI growth in April is quite satisfactory and mainly driven by the new leadership's efforts in advancing economic restructuring," Huo said.

The State Administration of Foreign Exchange, China's foreign exchange regulator, recently scrapped 24 regulations related to the administration of capital for foreign direct investment, in line with the government's efforts in reducing red tape to increase transparency and promote investment facilitation.

However, Lu Jinyong, director of the China Research Center for FDI at the University of International Business and Economics, worried that speculative overseas money flowed into China disguised as project investments, just as it did with trade payments.

"In 2013 we will see China's FDI equal to last year with no big change," Lu added.

Rising costs at home and competition from other emerging countries were also blamed for the slowed FDI flow into China, according to Lian from the Bank of Communications.

He added that FDI in China will probably decline in the following months and maintain a slow pace of growth in the long term.

Huo said, "For China to consolidate the use of foreign capital, the government needs to speed up the reforms in investment and financing systems, including the removal of approvals and the simplification of procedures, as well as further opening up its services sector."