China drew a record $92.4 billion in foreign direct investment (FDI) in 2008, up nearly a quarter on the previous year, signaling its continued drawing power for foreign firms even amid the global economic downturn.
FDI rose 23.6% from the $74.8 billion in non-financial investment inflows in 2007, Commerce Ministry spokesman Yao Jian told a news conference on Thursday. Inflows in December alone reached $6 billion, down nearly 6% from a year earlier but marking an increase from the $5.3 billion recorded in November.
Foreign investment has surged since China joined the WTO in late 2001, but the trend has been softening in recent months due to the global economic crisis. The figures suggest that while foreigners will probably make fewer investments in export-oriented factories in China, they will still look to it as a haven of growth amid the global downturn, said Chris Devonshire-Ellis, senior partner with investment advisory firm Dezan Shira & Associates in Beijing.
“Where are you going to put your investment dollars? You’re going to put it where there’s going to be growth. That still seems to be very much a China play. And that money doesn’t seem to have dried up,” he said. “Companies that have got products or services which Chinese will buy, or that can be geared towards the Chinese market, I think are going to do very well.”
While the economy is well off its pace of 13% in 2007, some economists think it can still grow by around 8% this year, helped by government stimulus efforts focused on boosting domestic demand. The Commerce Ministry’s Yao said the increase in investment inflows came mainly from the services industry, excluding the financial sector, which the ministry’s figures do not include.
Foreign companies were also putting more money into central and western provinces, away from the traditional manufacturing hotbeds on the eastern coast, he said.
OUTBOUND INVESTMENTS SURGE
Outbound non-financial investments by Chinese firms grew even faster last year, leaping 63.6% to $40.65 billion. Chinese companies have been scouring the globe for energy and raw materials to feed the country’s industrial growth, a trend Yao said would continue as more firms joined in the push to move beyond China’s shores.
Yao acknowledged that China’s exports faced serious headwinds from the financial crisis, but he struck a note of confidence, citing increasingly diversified export markets and the improving ability of its companies to cope with challenges.
There is room for the government to raise export tax refunds yet more, after four such moves last year that brought the average refund rate up to 11.3% from 9.8%, he said. He added that Beijing would expand a program for offering 13% subsidies to rural residents who buy major home appliances, one of its efforts to stimulate domestic consumption.
Currently applied to such white goods as refrigerators, televisions and washing machines, the subsidies will be extended to motorcycles, computers, water heaters and air conditioners as of Feb. 1, Yao said. (Reuters)