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backCHINAtalk January, 2010

Foreign investment doubles in December

Foreign investment doubles in December.

Foreign direct investment (FDI) to China more than doubled in December, in the latest sign of economic recovery in the world's fastest-growing economy.

FDI skyrocketed by 103.1 percent from a year earlier to $12.14 billion, compared to the 32 percent year-on-year growth in November, the Ministry of Commerce said on Friday.

The foreign investment, which excludes investment in the financial sector, jumped for five months since August.

However, if full-year data is taken into account, China's FDI and newly approved foreign enterprises fell by 2.6 and 14.8 percent to $90.03 billion and 23,435 respectively.

Ministry spokesman Yao Jian said the latest figure signals foreign investors' confidence in the Chinese market despite the financial crisis.

Last year, 52 percent of foreign investment went to the manufacturing sector and 42 percent went to the service sector. But Yao said the service sector will attract more investors, who are expected to resort to mergers and acquisitions more often.

Yao called China "a most attractive FDI destination" and said the country's investment situation is getting better.

Chinese analysts echoed Yao's claim.

"As China's economic growth gains speed, the nation gains more trust from global investors," said Li Jianfeng, a macro-economy analyst at Shanghai Securities.

"The global economic recovery is also helping push up the surge," he said.

China's GDP growth will probably increase to 10.8 percent during the last quarter of 2009, compared with the 8.9-percent in the third quarter, according to a median of forecasts by 12 economists polled by Dow Jones. They also believed the growth for 2009 would stand at 8.5 percent, 0.5 percentage points higher than the government's goal.

"The financial crisis made them (foreign investors) hold back, but now they are turning active again," said Jinny Yan, an economist from Standard Chartered.

The better-than-expected exports in December had already provided a clue to the FDI surge, Li said. Chinese exports rose by 17.7 percent year-on-year last month, the first growth in the past 14 months. "The FDI will continue to grow during the first half of this year, but at a slow speed," Li said.

Google not a threat

Yao also said online search giant Google's recent intention to pull out of China will not hurt Sino-US trade or dampen investors' confidence.

"No matter what decision Google makes, it will not affect overall trade and economic relations between China and the United States," Yao said.

"The two countries have multiple communication channels. We are confident in the healthy development of economic and trade relations between China and the United States."

The world's largest Internet search company threatened to quit the Chinese market - which contributed less than 2 percent of its global revenue - citing concerns of censorship and cyber hacks.

A number of foreign investors said they would not follow Google's move.

In a Bloomberg interview on Thursday, Microsoft Corp CEO Steve Ballmer said the company will not consider exiting China, citing the growth trend.

Similarly, the 2010 Business Climate Survey released by the American Chamber of Commerce in China this week showed its members remained optimistic about China over the medium- and long-term.

Source: China Daily - GAI

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