China's foreign direct investment slows again in October as economy cools

BEIJING (Reuters) - China's foreign direct investment fell for the fourth straight period on a cumulative basis in October, underscoring investor caution as the world's second-largest economy cools.

China drew US$95.9 billion in foreign direct investment (FDI) in the first 10 months of 2014, the Ministry of Commerce said on Tuesday, down 1.2 per cent from a year earlier.

In October alone, the country attracted US$8.5 billion in FDI, up 1.3 per cent from a year earlier, the ministry said.

Investment flows into China are an important gauge of the health of the world economy and is also a good indicator of where capital is flowing within the country.

In line with China's manufacturing slowdown, the data showed investors were flocking to the services industry.

The Chinese services sector attracted US$53.1 billion worth of FDI in the first 10 months of the year, up 6.6 per cent from the same period a year ago, and much higher than the US$32.5 billion that flowed into the manufacturing industry.

Among the 10 countries that were the biggest investors in China, investment from South Korea leapt 26.4 per cent on an annual basis and that from Britain surged 32.4 per cent.

In contrast, investment from Japan plunged 42.9 per cent from a year earlier while FDI from the United States fell 16.2 per cent and European Union dropped 23.8 per cent.

And as China's maturing economy slows, more and more Chinese companies are looking to invest abroad in search of lower costs and better returns.

Indeed, the strength of China's non-financial direct outbound investment was a far cry from its FDI in the first 10 months of this year, jumping 17.8 per cent from the same period last year to US$81.9 billion.

Despite moderating FDI growth, China has repeatedly said it expects its FDI to hit a record high of US$120 billion this year, barring no sharp changes in global capital flows.

But FDI is still a small contributor to China's overall capital flows compared to exports, which were worth about US$2 trillion in 2013.