China’s Growth Engine Stalling?

Foreign direct investment (FDI) is falling says the South China Morning Post:

China’s foreign direct investment inflows dropped 2.4 per cent in the first four months of this year versus last year, the longest period of declining inflows since the depths of the global financial crisis and a sign of external economic headwinds.

The Commerce Ministry said on Tuesday that the country drew US$37.9 billion in foreign direct investment (FDI) between January and April, down from US$38.8 billion attracted in the same period last year. April’s inflow alone was US$8.4 billion, down from US$8.5 billion a year ago…

China’s trade surplus as a proportion of economic activity has been shrinking for several years. The country’s overall current account surplus was 2.8 per cent of GDP at the end of last year, having been as high as 10.1 per cent in 2007.

China’s central bank said on Saturday it would cut the proportion of cash that banks must hold as reserves by 50 basis points, effective from May 18. It should free an estimated 400 billion yuan for lending to head-off the risk of a sudden slowdown in the world’s second-largest economy.

Economists in the latest Reuters poll see the annual rate of economic growth dipping to 7.9 per cent between April and June, the first time it will have fallen below 8 per cent since 2009, a level regarded by many investors as the minimum growth needed to ensure sufficient job creation.

China has been fine-tuning economic policy setting since the autumn of last year as the outlook for the global economy darkened, export growth sank and capital inflows – a core component of money supply – stalled.

One thought on “China’s Growth Engine Stalling?

  1. Pingback: What Does FDI Have To Do With the Price Of Tea In China? | The Rio Norte Line

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