China’s FDI for November Drops by 36.5 Percent

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Dec. 10 – Foreign direct investment in China dropped by 36.5 percent in November compared to last year’s figures.

The Ministry of Commerce said FDI was at US$5.3 billion, making it the lowest figure in the last 14 months. China’s central bank has already delayed gains by the yuan against the dollar since mid-July.

Last month, in addition to the massive economic stimulus plan it also aggressively cut interest rates by the most in 11 years.

“Foreign direct investment will continue to shrink slowly as lower interest rates and a weakening yuan squeeze yields for speculators and the outlook for China’s economy dims,” Lu Zhengwei, chief economist at Industrial Bank Co. told Bloomberg. “Many factories that have closed along China’s coastal regions are foreign-invested.”

According to a World Bank forecast China will have its weakest growth in almost two decades in 2009 in the wake of slowing export demand and construction.

The Ministry of Commerce said that in the first 11 months of the year, investment climbed by 26.3 percent to US$86.4 billion, a figure higher than last year’s US$74.8 billion.

“We expect much slower foreign direct investment growth in 2009,” said Standard Chartered Bank Plc in a report last month. “Companies were likely front-loading or exaggerating their investments in order to bring in funds and gain exposure to the yuan” in the first half of this year, the bank added.