China's FDI growth slows in 2014 as economy cools, outbound investment soars

SHANGHAI (Reuters) - China's foreign direct investment (FDI) rose an annual 1.7 per cent last year, although the pace slowed from 2013 as a cooling economy and shifting drivers of growth weighed on offshore investment flows.

China attracted a record US$119.56 billion from foreign investors last year compared to US$117.6 billion in 2013, the Ministry of Commerce said in a statement on its website on Thursday.

Outbound direct investment (ODI) surged 14.1 per cent to a new high of US$102.9 billion as Chinese corporate appetite for foreign investments grew, although ODI failed to overtake FDI as some had predicted, the commerce ministry told reporters on Friday. ODI growth, however, slowed from 16.8 per cent in 2013.

Growth in FDI also slowed from 5.3 per cent in 2013, and was the weakest in two years, indicating that the economic cooldown and shifting composition of the Chinese economy are starting to temper foreign sentiment.

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.

The data showed that the government-led shift away from investment-heavy industries toward services and consumption is taking hold with service sector FDI increasing 7.8 per cent, while manufacturing FDI declined 12.3 per cent.

Services made up 55.4 per cent of overall FDI, with manufacturing taking up 33.4 per cent.

FDI in December leapt 10.3 per cent from the same month in 2013 to US$13.32 billion, MOFCOM said.

Investment from South Korea rose 29.8 per cent year-to-date, the fastest in 2014, followed by Britain with 28 per cent growth. Japanese FDI fell 38.8 per cent while EU investment declined 5.3 per cent.

Data next week is expected to show China posting its lowest annual gross domestic product growth in 24 years.

The central government has acknowledged that GDP will slow as it seeks to reform the economy and find new engines of growth, all while navigating the risks of a cooling property market, excess factory capacity and sluggish investment.

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