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Foreign investment into China slumps in July

Foreign direct investment (FDI) into China dropped by more than a sixth year-on-year in July, the government said on Monday (Aug 18), but denied any link to Beijing's multiple probes into foreign companies.

BEIJING: Foreign direct investment (FDI) into China dropped by more than a sixth year-on-year in July, the government said Monday, but denied any link to Beijing's multiple probes into foreign companies. FDI - which excludes investment in financial sectors - fell 16.95 per cent in the month to US$7.81 billion (S$9.76 billion), the commerce ministry said.

The fall saw FDI in the first seven months decline 0.35 per cent to US$71.14 billion, eliminating a small increase at the half-year stage.

Chinese authorities have in recent months launched anti-monopoly, pricing and other inquiries into foreign firms in sectors ranging from auto manufacturing and pharmaceuticals to baby milk. The probes have raised concerns among investors that Beijing is targeting overseas companies. But commerce ministry spokesman Shen Danyang denied any connection between the investigations and the fall in FDI.

"It is only normal that there is volatility of FDI in individual months when China steps up efforts to balance the economic structure," he told reporters. "It is not sufficient enough to reflect the general trend. It must not be linked to the anti-monopoly probes into some foreign invested companies or be associated with other baseless speculations."

"All market players should operate their business according to the law," he added. "They should be punished according to the law and be subject to appropriate legal penalties if they violate the law."

In the first seven months of the year, investment from Japan tumbled 45.4 per cent to US$2.83 billion, with that from the EU dropping 17.5 per cent to US$3.83 billion and from the US down a similar 17.4 per cent to US$1.81 billion. But investment from South Korea - which has been enjoying closer diplomatic ties with China - rose 34.6 per cent to US$2.92 billion, and from Britain, the home of troubled pharmaceutical giant GSK, soared 61.2 per cent to US$730 million.

China's own overseas investment in non-financial sectors leapt 84.9 per cent year-on-year in July, to US$9.21 billion, the ministry said. For the first seven months of the year it was up 4.0 per cent to US$52.55 billion. "This is the first growth since February this year, after the impact of big projects last year waned," the ministry said in a statement.

Chinese investment into the EU leapt by 293.1 per cent year-on-year for the period, and into Japan by 160.9 per cent, the ministry said, without giving totals. Investment into the US was up 12.8 per cent to US$2.82 billion.

China's economy expanded 7.7 per cent in 2013, the same as 2012 - the worst pace since 7.6 percent in 1999. Beijing's official growth target for this year is 7.5 per cent, also the same as last year's. Gross domestic product grew 7.4 per cent in the first half of this year.