* March FDI inflow at $11.8 billion, Q1 at $29.8 billion
* Inflows down versus year ago, but still on track to beat
* March outbound FDI at $16.55 billion
By Zhou Xin and Nick Edwards
BEIJING, April 17 China drew in $29.5 billion in
foreign direct investment (FDI) in the first quarter, down 2.8
percent from a year ago, while inflows in March fell 5.6 percent
to $11.8 billion, data from the Commerce Ministry showed on
This follows a $124 billion Q1 surge in China's foreign
exchange reserves, reversing a rare decline of $20.6 billion in
the fourth quarter, showing that capital is flowing back into
the country on a path firm enough to underpin credit creation
and money supply growth.
"For foreign investors, China remains attractive compared to
other countries," Zhao Hao, economist at ANZ Bank in Shanghai,
China's economy grew at its slowest in nearly three years in
the first three months of 2012, with a weaker than expected
reading raising investor concerns that a five-quarter long slide
has not bottomed and that more policy action would be needed to
The annual rate of GDP growth in the first quarter slowed to
8.1 percent from 8.9 percent in the previous three months, the
National Bureau of Statistics said on Friday, below the 8.3
percent consensus forecast of economists polled by Reuters.
China has eased monetary policy twice since the autumn of
last year when it began a programme of fine-tuning moves to help
shield the country from a slowdown in the global economy,
cutting 100 basis points from the proportion of deposits banks
must hold as reserves.
That has created an estimated 800 billion yuan ($127
billion) of new lending capacity in the financial system and
economists forecast another 1.2 trillion yuan is waiting in the
wings, earmarked to be released in 150 bps of further cuts to
the required reserve ratio (RRR) through the remainder of 2012.
Chinese banks extended 1.01 trillion yuan ($160.1 billion)
worth of new loans in March, way above forecasts for 800 billion
yuan, a sign of fresh traction in China's efforts to boost
credit creation to support a cooling economy.
The People's Bank of China said last week that broad money
supply rose 13.4 percent in March from a year ago, stronger than
market expectations for 12.9 percent growth and ahead of the
previous month's 13 percent pace.
China also returned to an export-led trade surplus of $5.35
billion in March, after a $31.5 billion deficit in February,
heralding the prospect that a rebound in the global economy is
lifting overseas orders just in time to compensate for a
slowdown in domestic demand.
ON COURSE FOR RECORD
The March FDI data leaves China on course to surpass the
$116 billion record inflow seen in 2011. The Commerce Ministry
targets and average of $120 billion in investment flows in each
of the next four years.
To help deliver that goal it has drawn up new rules to
encourage foreign investment in strategic emerging industries,
particularly those that bring new technology and know-how to
Meanwhile, China's efforts to expand its own direct
investments in foreign countries were revealed to be surging.
Outbound FDI rose 94.5 percent in Q1 versus a year ago to stand
at $16.55 billion.
"In the future, the trend is that FDI inflows will pick up
while outbound FDI will rise even faster, so the net inflows
will fall," Zhao said.
Investment inflows, which surged in the years after China
joined the World Trade Organisation in 2011, have recovered
strongly after being hit hard by the global economic slowdown.