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China Foreign-Investment Gains Ease as Economic Slowdown Deepens

Photographer: Tomohiro Ohsumi/Bloomberg

Robots work on the welding line at a Beijing Hyundai Motor Co. plant in Beijing. Close

Robots work on the welding line at a Beijing Hyundai Motor Co. plant in Beijing.

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Photographer: Tomohiro Ohsumi/Bloomberg

Robots work on the welding line at a Beijing Hyundai Motor Co. plant in Beijing.

Foreign direct investment in China rose in May by the least in four months, a sign of concern that growth is slowing in the world’s second-biggest economy.

Inbound non-financial investment increased 0.3 percent from a year earlier to $9.26 billion, the Ministry of Commerce said today in a statement in Beijing, after a 0.4 percent gain in April. China’s outbound investment rose 20 percent in the first five months of the year to $34.3 billion, compared with a 27.4 percent pace in January-April.

The report follows data indicating capital inflows slowed last month while growth decelerated in exports, industrial production and lending. Confidence is fading in an economic rebound this quarter, with investment banks from Morgan Stanley to Barclays Plc cutting their 2013 expansion forecasts.

“Growth in developed markets is picking up while China’s growth is slowing down, and China is no longer an ideal place for low-value-added manufacturing,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, said before the release.

South Korea-based Samsung Electronics Co. (005930), the world’s largest smartphone maker, may boost investment by $1 billion in Vietnam’s Bac Ninh province, the state-run Dau Tu newspaper reported last week.

The Chinese government is trying to streamline regulatory procedures for foreign investors to boost inflows as Premier Li Keqiang seeks to pare the government’s role in the economy. Huang Feng, deputy director of the Commerce Ministry’s FDI department, said June 4 that the ministry’s examinations of projects fell to about 100 in 2012 from more than 3,000 in 2005.

NDRC Projections

The National Development and Reform Commission, China’s top economic-planning agency, said March 5 that foreign direct investment may rise about 1.2 percent to $113 billion this year. Outbound investment was projected to increase 15 percent to $88.7 billion, the agency said in its annual report to the legislature.

Foreign-invested enterprises contributed half of the country’s exports and imports in 2012, a quarter of industrial output and a fifth of tax revenues, according to data from the Ministry of Commerce.

Data earlier this month showed export growth slumped to a 10-month low in May and imports unexpectedly fell, while new local-currency lending and industrial production trailed estimates.

Yuan positions at local financial institutions accumulated from sales of foreign exchange, an indication of capital inflows, rose in May by the least since November, central bank data showed last week.

--Zhou Xin, with assistance from Nicholas Wadhams in Beijing. Editors: Scott Lanman, Sunil Jagtiani

To contact Bloomberg News staff on this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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