Monday, March 16, 2009

Foreign investment in China falls

Foreign investment in China fell in January and February as overseas companies were hit by the global recession, official figures have shown.

The amount of direct investment from abroad was $13.3bn (£9.5bn) - a drop of 26.2% from the same period a year ago.

Holidays over China's Lunar New Year mean the combined January and February figures are seen as a better indicator of the economy than monthly data.

The number of newly-established firms fell 13%, the commerce ministry said.

Foreign investment - which rose by 23.6% in 2008 to $92.4bn - has been one of the factors driving the rapid growth of China's economy.

But analysts say the figure has been under pressure in recent months amid the financial crisis - with further drop-offs in investment expected to contribute to the slowing pace of growth in China.

Energy deals

Separately, Beijing has said it will send more business missions abroad this year to look for investment opportunities.

"In the current situation, to increase investment exchanges with some countries is an important measure to stimulate the global economy," said commerce ministry spokesman Yao Jian.

The government says it signed contracts worth more than $13bn in the UK, Germany, Switzerland and Spain after a 200-member group of businesspeople and officials visited Europe last month.

Chinese firms have signed a flurry of energy and resource deals - including some to get oil from Russia, Venezuela and Brazil.

Meanwhile China's biggest aluminium producer has agreed to invest $19.5bn in Anglo-Australian miner Rio Tinto.

In another development, the Financial Times reported that Beijing had lost tens of billions of dollars of its reserves having begun investing in global equities, just before world markets collapsed last year.

The State Administration of Foreign Exchange (Safe), which manages about $2,000bn of reserves, began began putting money into global stocks in 2007, the paper reported.

Safe does not reveal details of its portfolio - but based on the performance of world markets, China's losses would exceed $80bn, the FT said.

Story from BBC NEWS:

Published: 2009/03/16 09:09:15 GMT

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