Commerce Ministry says decline is not related to anti-monopoly measures

The Commerce Ministry denied on Tuesday any connection between two straight months of decline in foreign direct investment in China and its anti-monopoly measures.

FDI into China fell by 14 percent to $7.2 billion last month from a year earlier, after a 17 percent drop in July. It was the first consecutive double-digit decline since 2009.

In the first eight months of 2014, China's FDI fell by 1.8 percent from a year ago to $78.3 billion.

Ministry spokesman Shen Danyang attributed the drop to the weak global economy, fluctuation of the yuan and soaring costs, which made investing in China's low-end manufacturing unattractive.

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Last year, average manufacturing costs in China were only 30 percent lower than in the US, he said. As a consequence, FDI in China's manufacturing in the first eight months slumped by 15.7 percent compared with a year earlier, and its share in total inbound investment retreated to 35 percent.

By comparison, FDI in service industries grew by 8.9 percent in the same period, accounting for 55 percent of FDI.

Shen said he was confident that FDI in 2014 could hit $120 billion. But he also acknowledged that China has bid farewell to the age of dazzling FDI growth.

Asked whether there is any link between China's recent antitrust investigations and the fall of FDI, he said: “This is more of an emotional response from some foreign-invested companies and the exaggeration of the media. It is not an indication that China's business environment has deteriorated.”

Shen's comments came amid simmering concern that foreign companies are under selective and subjective enforcement of antitrust law, after some high-profile antitrust cases.

In a sign of the government's eagerness to convince foreign businesses in China that they are not targeted or discriminated against, a rare joint news briefing was held last week by the three antitrust regulators, which stressed that only about 10 percent of anti-monopoly investigations have involved foreign businesses.

Premier Li Keqiang assured Western companies last week that China welcomes overseas firms competing in China's market under the principle of fairness.

However, the main US and European business lobbies in China were blunt about their unease. Representing more than 1,800 European companies, the EU Chamber of Commerce put forward 800 recommendations in its latest advocacy document, including market access, the advancement of rule of law, State-owned enterprise reforms and equal treatment of European companies.

The US Chamber of Commerce said 60 percent of its members felt they are less welcome in China and almost half believe foreign companies are being targeted in the country's latest antitrust drive.

Investment from the European Union fell by 17.9 percent year-on-year, second among major economies only to Japan, which plunged by 43.3 percent, the ministry said. Investment from the US slumped by 16.9 percent.

As FDI dropped, China's outbound direct investment growth also slowed.

Non-financial direct outbound investment rose by 15.3 percent in the first eight months from a year earlier to $65.2 billion, slower than previous growth rates of more than 20 percent.