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Foreign direct investment in China rises

By Philip Smith

UN said such investment could increase globally this year on the back of modest growth as trade tensions between China and the US ease

Foreign direct investment (FDI) into China rose 5.8 per cent to ¥941.5bn (£105bn, €123bn, $136bn) last year compared to the previous 12 months said the county’s commerce ministry.

It means China remains the second largest recipient of FDI globally, said Chinese vice-commerce Minister Qian Keming. The largest being the US.

China’s outbound direct investment (ODI) declined 8.2 per cent to ¥764bn in 2019, said Qian. The structure of ODI was more “balanced” with most flows to rental and commercial services, manufacturing, distribution and retail, he said.

$15bn of that investment went to countries as part of the Belt and Road Initiative, China’s plan to link China with Asia and Europe through large-scale infrastructure projects.

Outward investment by Chinese firms was once a significant driver of global asset prices, but it has fallen sharply since Beijing tightened capital controls in 2016.

The UN trade and development agency UNCTAD said that, globally, FDI dipped slightly last year – down one per cent to $1.39tr - due mainly to massive divestment in Hong Kong as a result of political unrest and a drop in flows into Britain due to Brexit uncertainty.

However, it said FDI could rise marginally this year on the back of modest growth as trade tensions between China and the US ease.

FDI, which includes cross-border mergers and acquisitions plus intra-company loans and investments, is a bellwether of globalisation and a potential sign of future growth of corporate supply chains.

FURTHER READING: China says factory activity grew in December

FURTHER READING: Business investment into Singapore surges to seven-year high

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