Friday, May 22, 2009

China's FDI inflow

According to Bank of Finland:

Foreign direct investment inflows into China declined 21 % y-o-y during January-April. The $6 billion FDI inflow for the month of April translated into a decrease of 23 % y-o-y. Although the contraction from the start of the year appears dramatic, it actually represents a return to more typical levels. FDI inflows were massive in 2008, reaching $108 billion for the year. In the first four months of this year, investments are actually beating the same period in 2007.

More tellingly, the number of projects under implementation has declined each year over the past four years. On the other hand, the average size of a project was growing until the start of this year. Nominally, foreign investment in China is relatively small, representing a mere 7 % of total investment annually. Hong Kong is the largest provider of FDI (about 46 %), and its relative contribution has increased sharply as other countries (including tax havens) have pulled back from investment in China. Combined EU and US investments represent less than of 10 % of total foreign investment at the moment.