China is not exactly panicking. But maybe, just maybe, China is beginning to worry a tiny bit about its well-managed economy losing its grip on a thus far dependable throng of overseas investors.
New data released by China’s Ministry of Commerce this week shows that in the first half of this year, direct investment from the United States to China dropped by 3.2 percent over the same period last year, to $1.63 billion.
The latest monthly figures, revealed Thursday (Aug. 16th), don’t look good, either.
Foreign direct investment (FDI) into China (not just from the United States, but from all over the world) fell for the second consecutive month in July. This brought the total FDI inflow for the first seven months of the year to $66.67 billion, down 3.6 percent year on the year.
Blame Obama for bringing back manufacturing jobs to the United States
The news [about declining inward investments in China] was apparently a story big enough to compel China’s commerce ministry spokesman Shen Danyang to talk to the China Daily.
While downplaying the ministry’s own data, Shen blamed the dwindling investment inflows on “the United States’ strategy of bringing manufacturing back home,” in addition to “the euro zone's ongoing debt crisis, China's strained land supplies and rising labor costs.”
In case this alarm wasn’t loud enough to convince the rest of the world, the Chinese government also made available Zhang Xiangchen, director of the Department of Policy Research at the Ministry of Commerce, for a separate interview with the China Daily. In that interview, Zhang said, "China is not worried about the massive transfer of factories by multinational companies to neighboring countries as the quality of foreign investment will improve.”
Well, one should always worry, when a government official says that he is NOT worried about something. Also, note the key phrase in his statement above: “neighboring countries.”
The Indonesian government just announced this week that Foxconn will be investing up to $10 billion in Indonesia to make products even cheaper than at the EMS giant’s China plants.
Foxconn isn’t alone. A few other multinationals are also moving production from China to low-cost countries in Southeast Asia. China Daily reported that Adidas said last month it will shut down the company's only fully-owned apparel factory in Suzhou, Jiangsu province, which employs 160 workers, at the end of October. This comes after Nike closed its only shoe factory in China, also in Suzhou, in 2009.
Although Zhang cautioned that the momentum [of declining investment in China] will probably continue in the following months, he held the view that the impact would be “limited” in the short term. He insisted that any fears are unfounded.
In explaining decline of U.S. investment in China, Zhang, too, focused on the 'Select USA' program promoted by the Obama administration. He said the program sets up a national promotion agency to attract more foreign investment, especially from China.