Foreign Direct Investment (FDI) inflows into China fell in March as investors spooked by a lingering European crisis cut down on spending.
According to data released by the Commerce Ministry Tuesday, the country drew in $11.76 billion in FDI in March, which is 6.1 percent lower than the year-earlier period. In the first quarter, China attracted $29.5 billion in FDI, 2.8 percent down from a year ago.
European investment in China decreased by a third in the first two months of the year, which could be a result of the growing concern that the Eurozone debt crisis is going to worsen. The International Monetary Fund has warned that escalation of Eurozone debt problems could cut China's 2012 gross domestic product growth in half.
China's growth slowed to 8.1 percent in the first quarter, the lowest rate in three years, due to soft global demand and reduced real estate investment.
China's investment-driven economic model, though successful for decades, is seen as no longer sustainable and the consensus is that reforms are needed to prevent a sudden downturn. Beijing has said its goal this year would be to promote steady and robust economic development.
The government has loosened credit conditions to protect the country from global economic downturn. In recent months, China cut the banks' cash reserves ratio twice, in a bid to spur lending to small businesses.
Last week, China reported an unexpected $5.35 billion trade surplus in March, which followed a vast deficit in February, an indication that the uncertainty in the global economy is slightly diminishing and the protectionist streak displayed by developed nations is moderately fading.
In 2011, the country saw a record inbound investment of $116 billion. This is likely to be surpassed in 2012, despite the recent pullback in FDI inflows.
At the same time, China's outbound investment in the first quarter is reported to be valued at $16.55 billion, an increase of 94.5 percent from a year ago.