China's Direct Overseas Investments Surged 72.8%

Foreign Direct Investment (FDI) into China slipped year-on-year in April by 0.74% to $8.4 billion, making it the sixth straight month of declining FDI.

The decline is attributed both to continuing economic difficulties in Europe, slow recovery in the US and the expectation that China’s own economic growth will slow in 2012.

Still the April figure is reason for optimism. It represents a far smaller decline than the 6.1% drop in March amid fears that China’s growth may take a bigger hit than is now generally expected. The decline had been 0.9% in February and 0.3% in January, according to the Ministry of Commerce. Overall FDI for the first four months of 2012 was $37.88 billion, a 2.38% decline from the same period of 2011.

Investments from the European Union plunged 27.9% during that period from a year ago. Much of that was offset by a 16% jump from Japan due to many major companies seeking lower-cost production bases. FDI from the US rose 1.9% on waning of overblown fears of a Chinese slowdown.

Beijing approved the formation of 7,016 foreign-invested companies during the four months, 13.94% fewer than a year ago.

On the other side of the coin, China’s non-financial overseas direct investments (ODI) surged 72.8% during the same period to $23.16 billion. Much of that was in the form of mergers and acquisitions of European firms in need of cash infusions, presenting attractive buying opportunities for Chinese firms seeking to establish global brands and marketing bases overseas.

Looking at just the first quarter of 2012 Chinese ODI nearly doubled with a 94.5% increase over the first quarter of 2011 to $16.5 bil. in the form of investments in almost 1,100 foreign companies in 109 countries. As of the end of March non-financial Chinese ODI totaled $338.5 bil.