Foreign Investment in China Rose 10.7% in January (Update2)
Feb. 19 (Bloomberg) -- Foreign direct investment in China rose 10.7 percent last month from a year earlier as companies such as Wal- Mart Stores Inc. and Coca-Cola Co. expanded to tap demand in the world's fastest-growing major economy.
Investment increased to $4.1 billion, as the government allowed 3,563 foreign companies to build stores and factories in January, China's Commerce Ministry said on its Web site. Contracted foreign investment, or investment pledged but not yet delivered, also surged 27.7 percent to $12.8 billion, the ministry said. This figure is an indicator of future investment.
China, the world's seventh-largest economy, attracted a record $60.6 billion from foreign investors last year, as companies tapped low labor costs and a market of 1.3 billion consumers. Government efforts to slow the economy by curbing credit to industries such as steel, autos and real estate haven't deterred foreign investors such as Pirelli & C. SpA.
``I think throughout the whole year, foreign investment growth will keep a pace beyond 10 percent,'' Jun Ma, an economist at Deutsche Bank in Hong Kong, said today.
A report yesterday showed China's production also rose 8.9 percent in January from a year earlier after jumping 14.4 percent in December. The January increase in output was the slowest in three years after the government clamped down on investment to help cool inflation and ease power shortages.
Lunar New Year
The January investment figure was not adjusted to take into account that China's seven-day Lunar New Year holiday fell in February this year and January last year. The production figures were adjusted for this.
China, the world's seventh-largest economy, attracted a record $60.6 billion in foreign investment in 2004 as economic growth reached an eight-year high of 9.5 percent. Contracted investment jumped to $153.5 billion.
``We have to manufacture in China,'' Giancarlo Grech, Pirelli China's president, said in a telephone interview in Beijing on Jan. 10. Europe's third largest tire-maker agreed in November to set up a 150 million-euro ($199 million) venture to supply customers such as Bayerische Motoren Werke AG and DaimlerChrylser AG.
Wal-Mart
Wal-Mart, the world's biggest retailer, plans to open as many as 15 new stores in China this year after the government removed restrictions on foreign retailers to meet World Trade Organization pledges, the Bentonville, Arkansas-based company said on Nov. 2.
Coca-Cola, the largest soft-drink maker, last month started production at a $12 million joint venture bottling and syrup plant in the northwest province of Gansu to serve a population of 57 million in five provinces including Tibet.
Companies are rushing to invest in China ahead of an anticipated revaluation of the nation's currency, the yuan, this year. Economists including Yiping Huang at Citigroup Inc. say they expect China's leaders to let the yuan appreciate against the U.S. dollar in 2005, easing a decade-old peg that U.S. politicians partly blame for a ballooning trade deficit with China.
Trade Surplus
China's trade surplus rose to a record $11.1 billion in December as exports surged by a third.
A growing trade surplus, rising foreign investment and surging speculative capital inflows will put more pressure on China to loosen the yuan peg, UBS AG chief Asian economist Jonathan Anderson, said in a Jan. 12 note to clients.
China's central bank bought about $180 billion of U.S. Treasuries last year to maintain the value of the yuan as foreign currency flowed into the economy, Anderson wrote.
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