China October FDI Falls To $8.31 Billion Amid Euro Zone, Japan Concerns

Foreign direct investment (FDI) inflows into China fell in October compared to that in the same month last year, as investors, who are concerned about the renewed debt crisis in the euro zone and also increasing trade relations with Japan, cut down on spending.

According to the data released by the Commerce Ministry Tuesday, the country drew in $8.31 billion in FDI in October, which is 0.24 percent lower than that in the same month a year ago, while it dropped 6.8 percent in September.

In the first ten months of the year, China attracted $91.74 billion in FDI, 3.45 percent down from that in the previous year while it was $83.43 billion for the first nine months which is 3.8 percent less from that in the previous year.

In 2011, the country saw a record inbound investment of $116 billion. This is expected to be surpassed in 2012 in spite of the recent pullback in FDI inflows.

Investment from Japan slowed down in October. In the first ten months, investment from Japan rose 10.9 percent, down from a 17 percent increase in the first nine months. The relationship between China and Japan took a bad turn after Tokyo said in September that it would buy the East China Sea islands claimed by both countries. The purchase of the islands for 2.05 billion yen ($26 million) was approved by Japan's cabinet Sept 11.

Protesters in China called for boycott of goods from Japan. Japanese companies such as Toyota Motor Corp, Honda Motor Co and Nissan Motor Co. stopped production at certain plants in China.

In the first ten months, the European investment in China decreased to $5.24 billion, which is 5 percent down from last year, as a result of the growing concern that the euro zone debt crisis is going to worsen. The International Monetary Fund has warned that escalation of the euro zone debt problems could cut China's 2012 gross domestic product growth by half.

China's gross domestic product growth slowed down to 7.4 percent in the third quarter, down from 7.6 percent in the second quarter, due to the soft global demand and reduced real estate investment in the world's second largest economy. The government has already lowered its economic growth target in 2012 to 7.5 percent. In 2011 and 2010, the economy grew at the rate of 9.2 percent and 10.4 percent respectively.