Foreign direct investment in the mainland declined a greater than expected 35.7 per cent year on year last month as multinationals remained cautious about prospects for the world's third-largest economy.
The Ministry of Commerce said US$5.36 billion was directly invested last month, US$3.6 billion less than in June, as the mainland economy continued to feel the impact of the global liquidity crisis.
Analysts said the decline also underscored concern about emerging asset price bubbles on the mainland. But they played down speculation it was due to a crackdown on the operations of some multinationals, such as Rio Tinto, some executives of which were arrested recently.
'I think the drop reflects still strained liquidity on international credit markets for multinationals rather than the fundamentals within China,' said Tao Dong, an economist with Credit Suisse. 'In addition, volatility in monthly foreign investment figures is nothing unusual, particularly when the summer comes.'
Foreign direct investment has declined for 10 consecutive months as a result of the global financial crisis. Foreign investment in the first seven months of the year totalled US$48.3 billion, 20.35 per cent less than a year earlier. But the year-on-year drop has narrowed month by month since April.
Each of the past 13 years saw a sequential decline in foreign investment between June and July in absolute numbers, according to statistics from Industrial Bank.
'But this year saw the biggest retreat,' said Lu Zhengwei, an economist with Industrial Bank. 'It is a sign of growing caution in China-bound speculative investment.'
