China has not sunk into deflation: trade ministry

    CHINA drew US$13.9 billion in foreign direct investment (FDI) in January, up 29.4 percent from a year earlier, the highest in nearly four years, the Commerce Ministry said yesterday.

    But analysts cautioned about reading too much into economic indicators for January alone, given the strong seasonal distortions caused by the timing of the Lunar New Year holidays, which began Jan. 31 last year but start Feb. 19 this year.

    January FDI rose 4.5 percent from December.

    Earlier data showed FDI in China rose just 1.7 percent in 2014, the slackest pace since 2012 and underscoring a cooling economy which is spurring more Chinese firms to plow money into assets overseas in a trend that is soon set to overtake inbound investment.

    Foreign direct investment is an important gauge of the health of the world economy and is also a good indicator of where capital is flowing within the country.

    Shen Danyang, the ministry’s spokesman, told reporters that China’s foreign direct investment will be stable for 2015.

    He added that while the world’s second-largest economy should pay attention to deflationary risks, China has not sunk into a deflationary cycle.

    In line with China’s manufacturing slowdown, the data showed investors were flocking to the services industry.

    Foreign direct investment in the services sector hit US$9.2 billion in January, up 45.1 percent from a year earlier and accounting for 66 percent of total FDI.

    China’s outbound direct investment (ODI) hit US$10.2 billion in January, up 40.6 percent from a year earlier, the ministry said.

    Last year, China drew a record US$119.6 billion worth of FDI, while ODI surged 14.1 percent to a new high of US$102.9 billion.

    The government has been encouraging Chinese firms to invest abroad to help them become more competitive internationally, utilize their surplus capacity, and help slow down the rapid build-up of foreign exchange reserves.(SD-Agencies)