BY Richard Summerfield
According to the United Nations economic agency UNCTAD, China overtook the US in 2014 to become the most popular destination for foreign direct investment (FDI). Despite this, for many commentators, last year was disappointing for Chinese inbound FDI, which increased by only 1.7 percent to $119.6bn - the lowest growth since 2012.
As economic growth slows, more and more Chinese firms have begun to look overseas for viable investment opportunities. Accordingly, Chinese outgoing investment appears set to overtake inbound FDI in the coming years.
But there is hope that 2015 may prove more successful in terms of FDI. In January, FDI into China increased by 29.4 percent compared to the same period a year ago, recording its strongest monthly pace in over four years. China attracted $13.92bn, up from $13.32bn in December 2014. The top 10 investors by region were led by Hong Kong, South Korea, Singapore, Taiwan and Japan, which accounted for 96.5 percent of total FDI into the country.
According to the data supplied by China’s commerce ministry, the services industry was the primary beneficiary of capital inflows. FDI into the services sector climbed to $9.2bn - a 45.1 percent increase from a year earlier and around 66 percent of total FDI. By contrast, manufacturing activity in the country is slowing down.
The commerce ministry, while encouraged by the influx of FDI already recorded in 2015, says it's still too early to suggest that China will remain the leading FDI target this year.
Some analysts have urged caution, noting that January alone may not be the strongest indicator of the likely annual FDI intake. Much of the scepticism is based on the strong seasonal distortions which have been caused by the timing of the Lunar New Year holidays, which began on 31 January 2014 but start on 13 February this year.