Falling property investment drives China H1 FDI drop
BEIJING (Reuters) - China's foreign direct investment inflows fell 3 percent in the first half of 2012 versus last year, the Commerce Ministry said on Tuesday, the latest sign of intensifying headwinds facing the world's second-largest economy as global growth slows.
The Commerce Ministry said on Tuesday that the country drew $59.1 billion in foreign direct investment (FDI) between January and June, with June's inflow alone down 6.9 percent on year ago levels at $12.0 billion.
That confirmed figures given by a vice commerce minister on Monday.
"A drop of 3 percent in FDI in the first six months is mainly due to falling investment in the property sector which is the result of macro policies and we cannot say it is a bad thing," Shen Danyang, the Commerce Ministry's spokesman, told a news conference.
Beijing is using strict curbs to cut speculative activity in real estate that has driven property prices to unaffordable levels in many places across the country and Premier Wen Jiabao has made repeated personal pledges to keep them until prices come back to more reasonable levels.
FDI in the property sector fell 12.4 percent in H1 versus a year earlier. Strip that out of the aggregate data and H1 FDI was down just 0.1 percent versus last year at $46.8 billion.
The FDI data follows a raft of other economic indicators for June, which showed fast-easing consumer prices, outright deflation in producer prices and weak import growth, thanks to shrinking demand at home and abroad.
China's economy slowed for a sixth successive quarter in the second quarter to 7.6 percent, its slackest pace in more than three years, dragging down growth in the first half of year to 7.8 percent.
FDI is an important gauge of the health of the external economy, to which China's vast factory sector is oriented, but it is small contributor to overall capital flows compared to exports, which were worth about $1.9 trillion in 2011.
A surprising bright spot in the FDI data came from the European Union, where struggles with a festering sovereign debt crisis have seen China's biggest overseas market cut back on orders for goods from Chinese factories.
The Commerce Ministry said FDI from the EU rose 1.6 percent year-on-year in the first half to $3.5 billion, reversing the 5.1 percent year-on-year drop in the first five months of 2012.
Investments from Germany, Switzerland and the Netherlands rose 31.2 percent, 213.1 percent and 67.3 percent, respectively, on year ago levels.
China drew a record $116 billion in foreign direct investment in 2011. The Commerce Ministry aims to attract an average of $120 billion in each of the next four years.
(Reporting by Aileen Wang and Kevin Yao; Editing by Nick Edwards)
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