Foreign investment in China falls further

BEIJING - Foreign direct investment (FDI) in China continued to fall in September, the government said on Friday, owing to persistent weakness in the global economy and a slowdown in China.

Investment from overseas declined by 6.8 percent from a year earlier to US$8.43 billion last month, the commerce ministry said.

The decline continued a downward trend stretching back to November, with the exception of May, when FDI eked out a marginal gain of 0.05 percent.

The government has blamed the slump on the slowdown in global economic growth, the prolonged European debt crisis and rising costs and weak demand at home.

For the first nine months of the year, foreign firms invested US$83.4 billion in factories and other projects in China, down 3.8 percent from the same period a year ago, the ministry said.

Investment by the 27-member countries of the European Union fell 6.3 percent on year in the first nine months of the year to US$4.83 billion, while that from the United States dipped 0.63 percent to US$2.37 billion, the ministry said.

Capital flows from 10 Asian countries and regions including Hong Kong, Japan, the Philippines, Malaysia, Singapore and South Korea also tumbled by 4.9 percent year-on-year in the period to US$70.99 billion, it added.

Ministry spokesman Shen Danyang said China was in an "adjustment stage" in terms of receiving foreign funds but that the government remains optimistic about the country's long-term appeal to overseas investors.

"We think the general trend of FDI development in the country remains positive and healthy," he told reporters at a briefing.

He added that there were "positive changes" in the quality and structure of the use of foreign capital, such as a rise in fund flows into less developed central China.

Data on Thursday showed the world's second-largest economy has slowed for seven consecutive quarters, expanding 7.4 percent in the three-month period ending on September 30, its worst performance since the first quarter of 2009.

Exports, the key indicator of the health of China's vital manufacturing sector, rose 9.9 percent in September on year to a record monthly high, but analysts warned the performance was unsustainable given the weak global outlook.

Shen downplayed hopes that the export sector has yet bottomed out.

"Currently the trade environment remains complicated and draconian and there are still many difficulties in expanding foreign demand, so that it is too early to come to the conclusion that China's foreign trade has recovered based on data for the single month," he said.

"The most key target for the full year at the moment is to try hard to maintain and improve our global market share."

IMF warns of rising risks to global economy

WASHINGTON: The International Monetary Fund stepped up its warnings Monday on risks to the global economy, mainly from the crisis-mired eurozone, as it trimmed its growth forecast for the rest of the year.

IMF economists said that the frail situations in Spain and Italy especially could quickly turn worse amid market doubts over eurozone leaders' resolve in implementing pledged reforms.

But they also pointed to the US "fiscal cliff" trajectory which, if not corrected, could crunch the US economy and heavily impact the rest of the world.

"In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly economic forecast.

"Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.

If policy reactions in major economies remain inadequate or too slow, the IMF said, fissures could deepen, they added.

"The main risk is obvious," IMF chief economist Olivier Blanchard told reporters.

"It is that the vicious circle in Spain and Italy becomes stronger, that output falls even more than it does, that one of these countries loses its financial access to markets," he told reporters.

"The implications of such an event could easily derail the world recovery."

The IMF said that largely due to sharper-than-expected slowdowns in newly industrialized Asia and in large emerging economies like China, India, and Brazil, it had cut 0.1 per cent off its April forecast for global growth, to a rounded 3.5 per cent.

For 2013, the forecast is 3.9 per cent, down from 4.1 per cent.

Emerging economies were generally taking correct measures to deal with slowdowns, the IMF said. But many "have also been hit by increases in investor risk aversion and perceived growth uncertainty, which have led not only to equity price declines, but also to capital outflows and currency depreciation."

Growth forecasts were also cut for the United States, to 2.0 per cent; Britain, to 0.2 per cent, and France, to 0.3 per cent. In Spain, the recession will persist through 2013, the Fund said.

On the bright side, forecasts for this year for Germany and Japan were revised higher -- to 1.0 per cent and 2.4 per cent, respectively, though the 2013 prediction for each was also trimmed slightly.

Also getting an upgrade was the Middle East and North Africa region, much of which has been struggling through deep political turmoil in the past two years. The IMF said the region would grow about 5.5 per cent this year, much better than the 4.2 per cent predicted in April.

The IMF said that major economies were making progress on cutting their fiscal deficit burdens, despite stiff challenges in risk-averse debt markets which have sent the borrowing costs of the troubled eurozone periphery countries skyrocketing.

The global lender reiterated its prescriptions of recent months: short-term fiscal balance targets for troubled economies like Spain and Italy can be de-emphasized to allow for growth while more focus is placed on medium-term adjustments and reforms.

"A steady pace of adjustment focused on the measures to be implemented rather than on headline deficit targets is preferable, especially in light of heightened downside risks to the outlook."

Moreover, the IMF suggested, the political stress of too much austerity -- set to meet fiscal targets -- could backfire in countries with IMF or IMF-linked bailout programs, like Ireland, Portugal and Spain.

"The recent deterioration in the political and economic climate in Greece serves as a warning about the potential onset of 'adjustment fatigue,' which remains a threat to continued program implementation."

Meanwhile the IMF singled out the overhanging risk from US political stasis that could send the country over a "fiscal cliff" due to laws that, if not changed, will force massive government spending cuts coupled with automatic tax hikes on January 1 which would severely crunch the world's largest economy.

"Avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence," the global crisis lender said in recommendations for the United States.

Singapore economy to slow to 3% in 2012: MAS survey

SINGAPORE - Singapore's economy will grow by 3.0 per cent in 2012, slowing from an expected 5.2 per cent in 2011 as the global economy and financial services sector cool, according to central bank's survey of private economists released on Wednesday.

The median forecast is at the upper end of the government's growth forecast range of 1-3 per cent for 2012.

The survey also expects the Singapore dollar to strengthen to $1.23 against the US dollar by the end of 2012 from an estimate of S$1.28 by the end of the year. It traded around $1.31 at 0300 GMT.

Asian economies have slowed in recent months, hurt by the euro zone debt crisis that has resulted in weaker demand for the region's exports.


The survey showed that growth in financial services sector in Singapore, which is one of Asia's biggest wealth management centre, is expected to slow to 4.2 per cent in 2012 from a forecast of 9.4 per cent in 2011.

According to the Monetary Authority of Singapore's (MAS) latest Survey of Professional Forecasters, economists now expect inflation in the city state to ease to 3.1 per cent next year from 5.1 per cent in 2011.

Singapore, like many Asian countries, is grappling with high inflation even as growth slows because of troubles in Western countries.

Economists in the survey have cut their forecast for this year's growth slightly to 5.2 per cent from 5.3 per cent in the previous survey in September.

Gross domestic product (GDP) growth in the October-December quarter of this year is now expected to be 4.4 per cent year-on-year, compared with 5.9 per cent in the previous survey.

For 2012, growth in financial services is expected to slow to 4.2 per cent from a forecast of 9.4 per cent in 2011.

Last month the Singapore government warned that the city-state's economy could contract in fourth-quarter growth, while 2012 GDP growth is likely to slow due to the weakness in the western economies.