Foreign investments, real estate show signs of slowdown

China Wednesday gave new signs of a slowdown in its economy with the announcement of a fall in foreign direct investment (FDI) and house prices in December, after having released a slowdown in growth Tuesday.

Last year, FDI in China reached a record of $ 116 billion, rising by 9.7%, according to the Ministry of Commerce. This is less than the figure in 2010, when these investments had increased by 17.4% to 105.74 billion. But in the last two months of 2011, they declined to 9.76% on an annual basis to 8.76 billion in November, from $ 12.2 billion in December.

The slower growth of FDI in China this year is part of a broader movement to reduce FDI from advanced countries to emerging countries and slower growth of the second world economy.

China has announced Tuesday a slow growth of 9.2% in 2011, after expanding by 10.4% in 2010. In the fourth quarter, GDP growth fell to 8.9%, its lowest level since the second quarter of 2009.

In 2011, foreign investment from the United States fell by 26.07% to three billion dollars while those from the EU also decreased, but only 3.65% to 6.35 billion of dollars. However, investments from ten Asian countries and territories, including Japan, South Korea, Taiwan and Hong Kong rose 14% to $ 100.5 billion, the ministry said.

For the first time, foreign investment in services, which amounted in 2011 to $ 55.24 billion, up 20.5%, exceeded those in manufacturing, which grew by only 5.1% to $ 52.1 billion.

For their part, Chinese investment abroad in non-financial sectors grew by only 1.8% last year to reach 60.07 billion dollars. Those to Europe, however, jumped 94.1% but the sums amounted to only 4.28 billion dollars.

Chinese investments in Africa have increased their share from 58.9% to $ 1.7 billion, according to the Ministry of Commerce.
The slow growth of FDI in China and Chinese FDI abroad “is mainly due to weak global economic recovery,” said Shen Danyang, spokesman of the Chinese Ministry of Commerce at a press.

“Some major developed economies like the United States and the European Union, are out of breath,” he added.

The World Bank found on its side in a report that “capital flows to emerging countries have much weakened as investors withdrew substantial amounts of money from markets in developing countries during the second half” of 2011.

“The global interest in investment has suffered an economic environment that is in trouble,” responded Zhou Hao, an economist at Australia and New Zealand Bank, based in Shanghai.
“In China, there is a rather restrictive policy on credit, which helps to reduce the flow of foreign direct investment,” said the analyst.

A more restrictive monetary policy and the order given to state banks to limit the amount of their loans also weighed on investments in real estate, the second pillar of the global economy.

In order to curb the rampant speculation, many cities have limited the number of apartments that individuals can buy, in December the prices of new homes fell in 52 out of 70 cities.

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