China Losing Investment Appeal... Foreign Direct Investment Drops 31.5%

China Ministry of Commerce Announces FDI from January to August
Economic Slowdown Due to Real Estate Slump and Weak Domestic Demand
Investment in Advanced Technology Manufacturing Slightly Increases

China's foreign direct investment (FDI) inflows continued to decline through August this year.

According to China's state-run Xinhua News Agency on the 15th, the Ministry of Commerce of China announced on the 13th that the FDI amount from January to August this year recorded 580.2 billion yuan (approximately 109 trillion won), down 31.5% compared to the same period last year.

However, the number of newly established foreign-invested companies during the same period increased by 11.5% year-on-year to 36,968.

By sector, investment in the advanced technology manufacturing sector accounted for 12.4% of total FDI, recording 72.1 billion yuan (approximately 13.5 trillion won), up 1.9% compared to the same period last year. By country, investments from Singapore and Germany increased by 11.6% and 5.4%, respectively.

On the 13th, a street in Beijing, China [Image source=AP·Yonhap News]

Since the beginning of this year, China's FDI inflows have not escaped a continuous downward trend. The rate of decline is increasing. Compared to last year, the decrease in FDI has expanded continuously from January-February (19.9%↓), January-April (27.9%↓), January-June (29.1%↓), January-July (29.6%↓), to January-August (31.5%).

As FDI decreases amid economic slowdown caused by real estate stagnation and weak domestic demand, there is growing analysis that the Chinese authorities face increasing pressure to achieve this year's growth target of 5%.

Foreign companies criticize that although the Chinese government is sending conciliatory signals to attract foreign capital, policies emphasizing national security and strengthening crackdowns conflict with the investment environment.