Bloomberg News

China Foreign Direct Investment Rises 11.1% to $8.45 Billion

September 15, 2011

Sept. 16 (Bloomberg) --Foreign direct investment in China climbed 11.1 percent in August from a year earlier as the nation’s growth encourages companies from Volkswagen AG to Caterpillar Inc. to expand.

Investment from overseas totaled $8.45 billion last month, after expanding 19.8 percent in July, the Ministry of Commerce said in a statement on its website yesterday. For the first eight months, investment rose 17.7 percent to $77.63 billion.

Businesses are turning to China to bolster sales as rising unemployment and government indebtedness damp confidence in developed nations. Premier Wen Jiabao said on Sept. 14 the country will continue opening its economy to investors and encourage consumption to drive growth. China’s economy grew 9.5 percent in the second quarter, from a year earlier.

“China remains the only bright spot amid the global financial turmoil,” Li Huiyong, an economist with Shanghai- based SWS Research Co., said before the announcement yesterday. “Investment returns in China remain high and local authorities are keen to attract funds for new businesses,” he said.

China overtook the U.S. to become the world’s biggest auto market in 2009. Companies including Kia Motors Corp., VW, and Peugeot SA are introducing new models and revamping older ones to lure buyers, Klaus Paur, Shanghai-based managing director at Synovate Motoresearch said on Sept. 9.

VW, the first overseas carmaker to enter China three decades ago, needs more factories in the country to match market growth, Chief Executive Officer Martin Winterkorn said this week. The Wolfsburg, Germany-based company opened its first engine reprocessing plant in China last month and said in November it plans to invest 10.6 billion euros ($14.6 billion) through its two auto manufacturing joint ventures in the country by 2015.

Caterpillar, the world’s largest maker of construction and mining equipment, said last month it plans to open a new manufacturing facility in eastern Jiangsu province to produce undercarriage components and track assemblies used on its hydraulic excavators.

Investment in China is climbing even as U.S. and European companies complain of discrimination. The European Union Chamber of Commerce in China said last week that laws and regulations are hindering its members from participating in the country’s growth.

While China has made progress in removing barriers to market access, hurdles remain, the Chamber said in a report published Sept. 8. Carmakers are required to take a Chinese partner and are limited to a 50 percent stake in their ventures, while telecommunication companies are effectively shut out from the world’s biggest mobile phone market, it said.

--Winnie Zhu. Editors: Nerys Avery, Ken McCallum

To contact Bloomberg News staff for this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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