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September 24, 2017

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China denies row with Vietnam is the culprit for foreign investment dropping by 6.7 percent in May

BEIJING -- Foreign direct investment into China fell 6.7 percent year-on-year to US$8.6 billion in May, the government said Tuesday, denying that a row with Vietnam was behind a slump in investment from Southeast Asia.

For the first five months of the year, foreign direct investment (FDI) — which excludes investment in financial sectors — was up 1.6 percent at US$48.91 billion, the commerce ministry said in a statement.

In April, FDI was US$8.7 billion.

"Investment from major countries and regions into China generally maintained a stable growth momentum," the ministry said.

Over the January-May period, investment from the European Union dropped 22.1 percent to US$2.58 billion, with that from Association of Southeast Asian Nations (ASEAN) countries falling 22.3 percent to US$2.54 billion.

Funding from Japan — China's fifth-biggest investor — plunged 42.2 percent, the ministry said, without giving an amount.

China has multiple territorial disputes with its neighbours, and tensions with Vietnam are at a peak after Beijing deployed an oil rig in disputed waters, but ministry spokesman Shen Danyang denied the row was responsible for the fall in ASEAN investment.

The statistics were based on specific projects and the comparison base also mattered, he told reporters.

"Generally China's cooperation with ASEAN has not been affected by the current situation," he said.

Beijing is also embroiled in a long-running dispute with Tokyo over islands in the East China Sea and Shen added: "The continued strains in China-Japan political relations will make the environment for bilateral economic cooperation deteriorate and may cause economic and trade relations to regress and affect companies' will to cooperate."

"The responsibility is not China's," he added.

China's top investors in the five-month period were Hong Kong, Taiwan, Singapore, South Korea and Japan, the ministry said.

Investment from South Korea and Britain jumped 87.9 percent and 62.2 percent respectively, while that from the United States dropped 9.3 percent, the ministry said, without providing values.

Foreign investment into China rebounded in 2013 to US$117.59 billion, though slowing growth in the world's second-largest economy could suppress inflows this year.

China's economy expanded 7.7 percent in 2013, the same as 2012 — the worst pace since 7.6 percent in 1999. Beijing's official growth target for this year is 7.5 percent, also the same as last year's.

It grew 7.4 percent in the first three months of 2014, the worst pace since a similar 7.4 percent expansion in the third quarter of 2012.

The commerce ministry also announced that China's overseas investment in non-financial sectors in the first five months fell 10.2 percent year-on-year to US$30.81 billion.

Investment to the United States rose 144 percent year-on-year to US$2.03 billion, and that to the ASEAN countries increased 4.2 percent to US$1.9 billion, it said.

China's investments into Hong Kong, the EU and Australia fell 32.6 percent, 9.2 percent and 3.2 percent respectively, it said.

But investment into Russia and Japan leapt by 105.7 percent and 141.9 percent "due to low comparison bases last year," it said.

Beijing has encouraged Chinese companies to "go out" to seal supplies of crucial resources as well as make overseas acquisitions to gain market access and international experience.

China's total outstanding overseas investment in non-financial sectors as of the end of May stood at US$556.5 billion, the ministry said.

Chinese outbound investment increased last year, hitting US$90.17 billion, and officials said it could overtake FDI this year.

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