Is china breakable?
Foreign direct investment into China has declined rapidly following a bumper year in 2008 and this trend looks set to continue for the foreseeable future...
2008 was a golden year for foreign direct investment (FDI) in China - investment surged throughout the year, topping £6.5 billion in March alone, an increase of 39.6 per cent from the previous year.
Following China's inclusion in the World Trade Organisation in 2001, FDI soared higher than all expectations. Total foreign investment in the mainland in 2008 was £64.7 billion said Chinese Commerce Ministry Spokesman Yao Jian.
The service industry attracted the most investment from overseas - £26.7 billion dollars, or a 24.2 per cent increase over 2007.
More foreign funds began flowing into China's western and central regions, instead of the heavily developed Eastern region and FDI into western China rose by 80 per cent over 2007 while central China's share rose by 36.4 per cent.
Fast forward a year and the picture is very different. Whilst FDI rose for the first ten months of 2008, growth declined in the final months of the year, reflecting the impact of the credit crunch on global markets.
Exports and Chinese domestic demand weakened last year as access to credit tightened and foreign investors grew more cautious.
"The full-year growth rate was well below the 35 per cent growth rate for the first 10 months of the year," added Mr Jian.
In December last year, FDI had fallen by 5.7 per cent to £4.33 billion compared to the same time last year.
Ma Yu, a Senior Researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said, "Multinationals will become even more cautious in expanding.
"A lot of the foreign investment that rushed to China over the past few years to gain from a stock and property boom is leaving," he added.
Where to invest
This year, the state of Washington in the USA took the top spot as the best global city for foreign investment in properties, followed by London and New York.
According to a survey by the Association of Foreign Investors, equity investors plan to increase investment activity by 40 per cent globally and by 73 per cent in the U.S, in comparison to 2008.
The U.S. provides the best opportunity for capital appreciation, according to 37 per cent of the group's members. Brazil jumped 10 places to grab the second spot and China came in third.
According to China's Commerce Ministry, average residential property prices in the country's 70 major cities fell for the first time on record in December, and exports are declining due to recessions in the USA and Europe.
The Chinese government has also announced a new aid package for its car and steel industries, consisting of tax breaks for purchases of cars and farm equipment, investments in car technology and assistance for updates of technology in steel factories.
Picture by angela7dreams