China Q1 FDI rises steadily on booming services sector

Wednesday, 20 April 2011 00:00 - - {{hitsCtrl.values.hits}}

Reuters) - Foreign direct investment flowing into China rose 29.4 percent to $30.3 billion in the first three months of the year, data showed on Tuesday, as the country’s booming services sector pulled in more funds.

Foreign direct investment in China’s services sector climbed 36.4 percent in the first three months from a year ago, outpacing a 23.6 percent rise in the manufacturing industry, the Ministry of Commerce said.

“An increasing portion of foreign direct investment is flowing into services industries, with the concentration in real estate, logistics and computer applications,” Yao Jian, the ministry’s spokesman said at a monthly conference.

China’s services sector attracted more foreign direct investment in the first quarter compared with the manufacturing industry, the ministry said.

Foreign direct investment in services industries accounted for 47.4 percent of total investment in the first three months of the year, compared with 45.3 percent for the manufacturing sector.

Investment inflows, which surged in the years after China joined the World Trade Organisation in 2001, have recovered strongly after being hit hard by the global economic slowdown.

Despite China’s appeal as a growth engine to foreign investors, Yao sounded caution over the country’s exports.

“China’s exports could face relatively big pressure this year as we are suffering from rising raw material costs and mounting labour costs,” Yao said.

China posted a rare trade deficit in the first quarter this year owing to rising global commodity prices, and some economists said that was likely a one-off phenomenon.

Yao said China was working hard on rebalancing its economy by importing and consuming more.

“China’s trade surplus will further narrow from last year’s 3.1 percent as a share of gross domestic product.

That will provide a good condition for a stable yuan exchange rate,” Yao said.

China has faced calls from the United States, the European Union and other major trading partners to let the yuan rise more quickly to cut its yawning trade surplus. They contend the artificially weak yuan gives Chinese exports an unfair priceadvantage.