FDI in China climbs for 12th month

Beijing: Foreign direct investment in China climbed in July, highlighting the confidence of companies from Volkswagen AG to Merck & Co in an economy that surpassed Japan in the second quarter.

Investment rose 29.2 per cent to $6.92 billion (Dh25.4 billion), the Ministry of Commerce said in Beijing yesterday. It was the 12th monthly gain. Estimates of five economists surveyed by Bloomberg News were for increases ranging from 30 per cent to 77 per cent.

China may contribute a third of the global economic expansion this year, Byron Wien, a senior managing director at private equity firm Blackstone Group LP, said on August 11. The International Monetary Fund last month raised China's growth forecast to 10.5 per cent this year, three times the pace of the US, as government policies support consumption and investment.

"Though China's economic growth slowed in the second quarter, it remains the most important growth engine for the world's economy," Sylvia Chiu, an economist at SinoPac Securities Corp in Taipei, said before the report.

Japan's nominal gross domestic product for the second quarter totalled $1.288 trillion, less than China's $1.337 trillion, the Japanese Cabinet Office said.

Foreign investment in the first seven months of the year rose 20.7 per cent to $58.35 billion, after a 19.6 per cent increase in the first six months, the ministry said.

China was the second-largest recipient of FDI last year, attracting $95 billion, behind the US with $130 billion, the United Nations said in a report last month.

Premier Wen Jiabao and Commerce Minister Chen Deming last month rejected complaints by the heads of BASF AG and Siemens AG that investment conditions for foreign companies are worsening. The government in April announced measures including preferential policies for land use and tax breaks, to attract foreign investment into industries such as renewable energy, high-technology and services.

Companies including General Motors and Merck, the second-largest US drugmaker, are stepping up investment as surging incomes drive consumption. The nation has surpassed the US as GM's biggest market and, combined with Hong Kong, is now the biggest market for Swiss watches including those made by Patek Philippe SA.

Hidden income

Average urban disposable household income in China could be 90 per cent higher than official figures at 32,154 yuan (Dh17,326.5), because of hidden income that isn't reported, a study published last week by the China Reform Foundation estimated. Households hide as much as 9.3 trillion yuan of income, most of it likely "illegal or quasi-illegal" and most of it going to the wealthiest families, according to the report conducted for Credit Suisse AG.

GM, which is planning an initial public offering to free itself from US government ownership, broke ground last month on a technology centre in Shanghai in which the company will invest $250 million. VW, Europe's largest carmaker, said last month it will build an assembly plant in eastern China as part of a plan to double capacity within four years. The nation overtook the US as the world's largest vehicle market last year.

Merck started building a manufacturing site in the eastern city of Hangzhou last month in partnership with the local government, Gail Thornton, a spokeswoman for the company's emerging markets division, said July 13.