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TRADE WARS
Foreign investment in China in first fall for three years
by Staff Writers
Beijing (AFP) Jan 16, 2013


China expects trade to grow at similar pace to GDP
Beijing (AFP) Jan 16, 2013 - China said Wednesday that it expects foreign trade to grow at a similar pace to the economy this year, indicating a feeble pickup from 2012.

"Our target this year is... to try to keep foreign trade increasing at a rate that is roughly in accordance with GDP growth," Shen Danyang, spokesman of the Ministry of Commerce, told reporters at a regular briefing without giving a specific figure.

China had declared it wanted to see trade grow by 10 percent in 2012, but last week announced expansion of 6.2 percent for the period, missing the target.

That was a marked slowdown from 2011, when trade increased 22.5 percent.

The world's-second largest economy is yet to announce its goal for economic growth this year. But Beijing has set a target of 7.0-percent average annual growth for the five years through 2015.

The median forecast in an AFP survey of 15 economists for economic growth this year is eight percent.

The government has mainly blamed the sluggish recovery of the world economy and rising trade protectionism for the country's failure to meet last year's trade target.

Shen cautioned that the situation this year would remain challenging.

He said China still "faces so many difficulties" including insufficient overseas demand and an unhealthy trade environment that would be "hard to turn around".

"So the general situation for foreign trade will remain severe in 2013," he said.

Foreign direct investment in China declined for the first time in three years in 2012, official data showed on Wednesday, amid economic turmoil in developed markets and a slowdown at home.

But Chinese direct investment overseas surged almost 30 percent from the previous year, with analysts saying that firms were increasingly looking to expand abroad as space for growth in China shrank.

FDI, which excludes financial sectors, into China declined 3.7 percent to $111.72 billion last year from 2011, the commerce ministry announced.

It slipped from an all-time high of $116 billion recorded in 2011 and was the first year-on-year decrease since 2009, according to previous figures.

Ministry spokesman Shen Danyang said, meanwhile, that in 2012, Chinese directly invested $77.22 billion overseas in non-financial sectors in 141 countries and regions, an increase of 28.6 percent from the year before.

Overseas investment is set to exceed inbound FDI in coming years as Chinese firms expand abroad due to overcapacity and limited room for growth at home, and as foreign companies cut back in China due to rising costs, an analyst said.

"It is very likely that China will become a (net) capital exporting country," Shen Jianguang, an economist with Mizuho Securities Asia Limited, told AFP, adding he expects that to happen in two to three years.

"Overseas investment is a relatively fast way for Chinese companies to obtain technology and a share of foreign markets."

The investment figures come after China's economy slowed throughout most of 2012, while developed economies such as the United States, the European Union and Japan largely remained weak.

For the month of December FDI into China also fell, slipping 4.5 percent from the same month in 2011 to $11.7 billion, the commerce ministry said.

Economic growth in China has declined for seven straight quarters through the three months ended September, though recent positive signs have led economists to expect a rebound in the fourth quarter and this year.

GDP growth figures for the fourth quarter and all of 2012 are scheduled to be released on Friday.

The median forecasts in surveys of economists by AFP are for growth of 7.8 percent in the fourth quarter and 7.7 percent in 2012. Economists polled also expect the economy to grow 8 percent in 2013.

The lion's share of FDI into China comes from 10 Asian countries and economies including Japan, Taiwan and Hong Kong. That figure declined 4.8 percent last year to $95.74 billion, the ministry said.

Investment from the European Union fell 3.8 percent to $6.11 billion, the ministry said.

But investment from the United States and Japan increased.

Inflows from the US gained 4.5 percent to $3.12 billion, while those from Japan increased 16.3 percent to $7.38 billion.

"The growth momentum of investment from some developed countries including the United States and Japan was good," the ministry said in a statement.

However, growth of investment from Japan last year slowed from the 33.2 percent gain recorded in 2011 amid a spiralling dispute between Beijing and Tokyo over uninhabited islands in the East China Sea.

Shen, the ministry spokesman, downplayed the overall decline in FDI, saying a study by the ministry did not find foreign investment leaving the country on a large scale.

"We still actively encourage foreign investment", he said, adding that China has been the largest foreign investment host nation among developing countries for 20 consecutive years.

In 2013, the ministry will "keep fundamental policies on foreign investment stable and the overall size of FDI stable", he said.

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