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Chinese Foreign Direct Investment Continues Downward Trend

Chinese Foreign Direct Investment Continues Downward Trend

Foreign direct investment into China declined in August as investors remained wary about the country's future growth prospects amid weak inflows from the debt-trapped European Union.

FDI fell by 1.4 percent in August from a year ago to $8.33 billion, data from the Ministry of Commerce revealed Wednesday. An exception to this downward trend was seen only in May this year.

China drew $74.99 billion in foreign direct investment during the January to August period, which was down by 3.4 percent from last year. At the same time, outbound investment surged about 39 percent to $47.7 billion.

Investment from the European Union slipped 4.1 percent through August and dropped 2.9 percent from the U.S. Meanwhile, inflows from Germany, the Netherlands and France grew in August.

Japanese investment advanced 16.2 percent. But this inflow is likely to be weighed down by the dispute over islands claimed by Japan. Protesters have attacked Japanese commercial establishments across China in recent days.

Commerce Ministry spokesman Shen Danyang said the dispute would "definitely" have a negative impact on trade between the two nations.

The weak investment inflow due to the European debt crisis and subdued domestic activity growth calls for more measures to shore up the economy.

China's economic growth slowed to a three-year low of 7.6 percent in the second quarter, just above the government's full-year target of 7.5 percent. This primarily reflected weak exports due to reduced demand from the European Union, the country's largest trading partner.

Premier Wen Jiabao early this month said the economy is on track to meet its growth target.

Elsewhere, Standard & Poor's said the outlook for the Chinese property development sector remains negative despite some improvement in the last six months from strengthening liquidity and higher sales volumes. Further, the planned increase in government spending in infrastructure could spill over to the sector.

by RTT Staff Writer

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