Declining FDI into China Not Linked to Foreign Company Probes, Officials Say

BEIJING - Foreign direct investment (FDI) into China dropped by more than a sixth year-on-year to a two-year low in July, the government said Monday, but denied any link to Beijing's multiple probes into foreign companies.

FDI -- which excludes investment in financial sectors -- fell 16.95% in the month to $7.81 billion, the commerce ministry said, its lowest since July 2012, when it was $7.579 billion.

The fall saw FDI in the first seven months decline 0.35% to $71.14 billion, eliminating a small increase at the half-year stage.

Chinese authorities have in recent months launched anti-monopoly, pricing and other inquiries into foreign firms in sectors ranging from auto manufacturing and pharmaceuticals to baby milk.

The probes have raised concerns among investors that Beijing is targeting overseas companies.

But commerce ministry spokesman Shen Danyang denied any connection between the investigations and the fall in FDI.

"It is only normal that there is volatility of FDI in individual months when China steps up efforts to balance the economic structure," he told reporters.

Foreign companies will not be scared away by investigations into the cases.

—commerce ministry spokesman Shen Danyang

"It is not sufficient enough to reflect the general trend. It must not be linked to the anti-monopoly probes into some foreign invested companies or be associated with other baseless speculations."

"All market players should operate their business according to the law," he added. "They should be punished according to the law and be subject to appropriate legal penalties if they violate the law."

Investment from US Down 17%

In the first seven months of the year, investment from Japan crashed 45.4% to $2.83 billion, with that from the EU slumping 17.5% to $3.83 billion and from the U.S. down a similar 17.4% to $1.81 billion.

But investment from South Korea -- which has been enjoying closer diplomatic ties with China -- rose 34.6% to $2.92 billion, and from Britain, the home of troubled pharmaceutical giant GSK, soared 61.2% to $730 million.

For the current year as a whole, Shen said FDI is still expected to grow at a similar pace to 2013, when it rose 5.3% year-on-year in 2013 to $117.6 billion.

"Foreign companies will not be scared away by investigations into the cases," Shen added.

China's own overseas investment in non-financial sectors soared 84.9% year-on-year in July, to $9.21 billion, the ministry said.

For the first seven months of the year it was up 4% to $52.55 billion.

China Investment into EU Soars

"This is the first growth since February this year, after the impact of big projects last year waned," the ministry said in a statement.

Chinese investment into the EU leaped by 293.1% year-on-year for the period, and into Japan by 160.9%, the ministry said, without giving totals.

Investment into the U.S. was up 12.8% to $2.82 billion.

Shen expected China's overseas investment to grow around 10% this year, more than the increase in FDI.

"It will be a new normal for overseas investment to exceed FDI," he said.

China's economy expanded 7.7% in 2013, the same as 2012 -- the worst pace since 7.6% in 1999.

Beijing's official growth target for this year is 7.5%, the same as last year's.

Gross domestic product grew 7.4% in the first half of this year.

Copyright Agence France-Presse, 2014