China February FDI grows at slowest pace in six months, outbound flows jump

Tue Mar 17, 2015 3:55am EDT
 
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BEIJING (Reuters) - Foreign direct investment (FDI) in China grew at its weakest pace in six months in February, but analysts caution that seasonality may explain the swings even as a weakening economy continues to dent investor confidence.

February FDI rose just 0.9 percent from a year earlier, slowing sharply from a 29.4 percent jump in January, adding to mostly weak February data, which has raised expectations of further policy steps from Beijing to spur growth.

"We expect FDI to maintain slow growth this year, probably similar to last year," said Zhao Hao, China economist at ANZ in Shanghai.

"China's manufacturing sector faces overcapacity and foreign investment into some other sectors is subject to high barriers."

February FDI of $8.6 billion was down 38 percent from $13.9 billion in January.

Analysts, however, caution not to read too much into the weak February FDI numbers as seasonality could cause swings. China's Lunar New Year holiday, which causes strong seasonal distortions, began on Jan. 31 last year but started on Feb. 19 this year.

For January and February combined, inbound FDI rose 17.0 percent from a year earlier, to $22.5 billion, the Commerce Ministry said on Tuesday.

Exceptionally strong rises in FDI inflows in the first two months of the year, including a nearly 874-percent jump for Saudi Arabia and a 367-percent gain for France, were due to one-off deals, commerce ministry spokesman Shen Danyang said.

Investment from the United States fell 31.8 percent from a year earlier, while that from Japan slumped 15.9 percent.   Continued...

 
A woman walks at the Bund in front of the financial district of Pudong in Shanghai March 5, 2015. REUTERS/Aly Song