June 15, 2012 / 11:18 AM / 6 years ago

China January-May FDI down, but May a bright spot

BEIJING (Reuters) - China’s foreign direct investment inflows fell 1.9 percent in the first five months of 2012 from a year earlier amid jitters about Europe’s debt crisis and a slowdown in the world’s second-largest economy, but a slight upturn in May offered signs of stability.

China drew $47.1 billion in foreign direct investment (FDI) from January to May, the commerce ministry said in a short statement on its website (www.mofcom.gov.cn) on Friday.

FDI was $9.2 billion in May alone was up a slight 0.05 from a year earlier, marking the first monthly rise in inflows this year.

But analysts cautioned against optimism that the worse is over given Europe’s evolving debt crisis and investors’ worries about China’s economic slowdown.

“Foreign direct investment in May is stronger than market expectations. But we hold a prudent attitude on the upturn in May,” said Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai.

“The recent domestic and global situation does not support the foreign investment increase since the yuan is depreciating and the outlook of the domestic economy is uncertain.”

China’s annual economic growth is almost certain to dip below 8 percent in the second quarter -- the sixth straight quarter of slower growth -- as demand at home and abroad slackens.

FDI is an important gauge of the health of external economy, to which China’s vast factory sector is oriented, but it is a small contributor to overall capital flows compared to exports, which were worth about $1.9 trillion in 2011.

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 Xiaoyi Shao and Kevin Yao; Editing by Don Durfee and Ed Lane

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