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China June FDI rises at fastest pace in more than two years

Buildings are seen in Beijing's central business district, July 11, 2013. REUTERS/Jason Lee
Buildings are seen in Beijing's central business district, July 11, 2013. REUTERS/Jason Lee

BEIJING (Reuters) - Foreign direct investment in China in June jumped 20.12 percent from a year ago, the Commerce Ministry said, the quickest gain since March 2011, showing that investors are still confident about the world's second-largest economy even as growth slows.

China drew $14.4 billion in foreign direct investment in June, the ministry said on Wednesday, while in the first half, FDI totaled $62.0 billion, up 4.9 percent from the same period of 2012.

FDI is an important gauge of the health of the external economy, to which China's vast factory sector is oriented, but it is a small contributor to overall capital flows compared with exports, which were worth about $2 trillion in 2012.

"The June FDI data shows overseas investors are still optimistic on the outlook of China's economy in the medium and long term thanks to China's recent efforts to move the economy up the value chain and its strong domestic consumption," said Li Wei, China economist at Standard Charted Bank in Shanghai.

"We expect stronger FDI in the second half compared to the first as we believe China can achieve a 7.5 percent GDP growth target for 2013 based on recent messages from policymakers," Li said.

Shen Danyang, commerce ministry spokesman, said on Wednesday that FDI inflows reflect a gradual rebound in the first half of this year even though a single month's figure would not signal a recovery in foreign investment.

"We believe the FDI inflows will still keep relatively stable in the second half of this year," Shen told reporters.

The Commerce Ministry data also showed FDI from the United States rose 12.3 percent to $1.8 billion in the first half from a year earlier while investment from Europe rose 14.7 percent.

FDI from Japan was up 14.4 percent in the first six months from a year earlier to $4.7 billion while inflows from 10 Asian nations rose 5.3 percent in the first half from a year earlier to $53.8 billion, which included $39.7 billion from Hong Kong.

FDI into China's services sector rose 12.43 percent in the first half from a year earlier to $30.6 billion. Radio, film and television firms attracted 121 percent more foreign capital from a year ago and investment in cultural and arts rose 154 percent.

Manufacturing sector inflows in the first half totaled $26.4 billion, down 2.14 percent versus a year earlier, the ministry said.

The FDI figures follow Monday's economic growth data which showed annual GDP growth slowed to 7.5 percent in April to June, the ninth quarter in the last 10 that expansion has weakened.

Doubts over whether China can still meet its full-year economic growth target have risen. But China's Premier Li Keqiang said on Tuesday that the 7.5 percent annual economic growth target remains achievable.

(Reporting by Langi Chiang, Xiaoyi Shao and Jonathan Standing; Editing by Jacqueline Wong)

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