By Fran Wang (AFP) – Jan 17, 2011
BEIJING — Foreign direct investment in China hit a record $105.7 billion last year, the government said Tuesday, highlighting growing confidence in the economy even as Beijing seeks to rein in growth.
Investment by overseas companies rose 17.4 percent year-on-year, with more than a fifth of the money flowing into the red-hot property sector, commerce ministry spokesman Yao Jian told a regular briefing.
China attracted $14.03 billion in foreign direct investment (FDI) in December alone, up 15.6 percent from a year earlier, Yao added.
"The improvement in the investment environment has become a new driving force of China's FDI," Yao told reporters.
Blistering growth in the world's second-largest economy and expectations for a stronger currency have attracted a growing number of foreign investors to China, hoping to get a better return on their money, analysts said.
"The strong full-year FDI figures show that the world is still largely sold on the China growth story, viewing China as a high-growth, high-returns location," said Alistair Thornton, an analyst at IHS Global Insight.
"Tepid growth prospects in the eurozone and United States have only served to heighten this."
The data were released ahead of key figures due later this week that are expected to show the Chinese economy expanded by a rapid 10 percent in 2010.
Beijing, alarmed by soaring food and property prices, has been trying to reduce the volume of money flowing into the economy as inflation continues to soar -- in November, it rose at the fastest pace in two years.
The large amount of foreign funds into the real estate market -- 22.7 percent of total FDI -- will likely be a "concern" for Beijing, Thornton said.
FDI slowed sharply in August, rising just 1.4 percent year-on-year compared with 29.2 percent in July and 39.6 percent in June.
But in September it picked up again, increasing 6.1 percent year-on-year, while in October it rose 7.9 percent and then leapt 38.17 percent in November.
The data include investment by overseas companies in industries such as manufacturing, real estate, services and agriculture but exclude money put into banks and other financial institutions.
China's investment abroad in non-financial sectors also hit a record in 2010, rising 36.3 percent on year to $59 billion as the country pumped more money into overseas energy, mining and agricultural projects.
Despite the sharp increase, Yao said China wanted even greater access to foreign markets and highlighted the recent obstacles encountered by Chinese firms when trying to invest in the US steel, manufacturing and telecom sectors.
"China is improving our investment environment and legal system. We hope relevant countries will further open their markets and areas available for foreign investment," he said.
Overseas investment through mergers and acquisitions totalled $23.8 billion, accounting for 40.3 percent of the total.
At the end of 2010, the country's accumulated overseas investment in non-financial sectors stood at $258.8 billion, Yao said.
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