China H1 FDI drops, dragged by property investment

Tue Jul 17, 2012 3:05am EDT
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By Aileen Wang and Nick Edwards

BEIJING (Reuters) - China's foreign direct investment inflows fell 3 percent in the first half of 2012 versus last year, largely as a result of Beijing's moves to deter speculators from entering an overheated property sector.

The dwindling inflows were a further sign of intensifying headwinds facing the world's second-largest economy as global growth slows, and the figures released by the Commerce Ministry on Tuesday followed other data showing China losing momentum.

Regardless of the dent to inward investment, Beijing voiced satisfaction that at least steps to cool off the property sector were having some effect.

"A drop of 3 percent in FDI in the first six months is mainly due to falling investment in the property sector which is the result of macro policies," Shen Danyang, the Commerce Ministry's spokesman, told a news conference.

"We cannot say it is a bad thing."

China drew $59.1 billion in foreign direct investment (FDI) between January and June, with June's inflow alone down 6.9 percent on year ago levels at $12.0 billion. That confirmed figures given by a vice commerce minister on Monday.

Beijing is using strict curbs to cut speculative activity in real estate that has driven property prices to unaffordable levels in many places across the country and Premier Wen Jiabao has made repeated personal pledges to keep them until prices come back to more reasonable levels.

FDI in the property sector fell 12.4 percent in H1 versus a year earlier. Strip that out of the aggregate data and H1 FDI was down just 0.1 percent versus last year at $46.8 billion.   Continued...

Construction workers are seen on a high rise office building site on the Pudong River bank at the new financial district of Pudong in Shanghai April 14, 2009. REUTERS/ Nir Elias