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Foreign Investment in China Misses Estimates Amid Growth Concern

Foreign Investment in China Misses Estimates Amid Growth Concern
A worker cleans the railing on one of the floors of the Grand Hyatt Shanghai hotel in Shanghai. A survey of 325 members of the American Chamber of Commerce in China in November and December found that rising labor costs were the biggest business risk in the country. Photographer: Tomohiro Ohsumi/Bloomberg

May 16 (Bloomberg) -- Foreign direct investment in China lagged behind analysts’ estimates in April, highlighting concern at the growth outlook for the world’s second-biggest economy after an unexpected slowdown last quarter.

Investment rose 0.4 percent from a year earlier to $8.4 billion, the Ministry of Commerce said in a statement today in Beijing. That was less than the 5.7 percent gain in March and the 6.2 percent median estimate in a Bloomberg News survey of eight analysts.

Bank of America Corp. and JPMorgan Chase & Co. this week cut 2013 growth estimates for China to 7.6 percent after April industrial production and investment trailed forecasts. Besides concerns about the short-term outlook for the economy, gains in labor costs may make the nation less attractive as a manufacturing base.

“The old model can no longer work,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said before the release of the data. “China can no longer be the most competitive in the labor-intensive sectors” amid rising wage costs, increasing concern for the environment and stricter employment laws, Shen said.

Premier Li Keqiang this week said the government will simplify bureaucracy to encourage private investment, building on a March pledge to pare the state’s role in the economy.

Economic growth of 7.7 percent in the first quarter trailed the median forecast of 8 percent in a Bloomberg News survey and fourth-quarter expansion of 7.9 percent. The government in March set a 2013 goal of 7.5 percent, the same target as in 2012.

A survey of 325 members of the American Chamber of Commerce in China in November and December found that rising labor costs were the biggest business risk in the country.

Li, who became premier in March, said this week that the nation has limited room for economic stimulus. At the same time, he said there’s “potential” for China to boost private and foreign investment.

To contact Bloomberg News staff for 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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