Foreign Direct Investment in the Property Sector

(In an interview with CCTV China 24 on July 17th 2012, Pro. Zhu Ning, Deputy Director of SAIF, analyzed recent foreign direct investment (FDI) in the property sector.)

Foreign Direct Investment in the property sector fell 12.4% in the first half of the year. Strip that out of the aggregate data and FDI was down just a tenth of a percentage point.

It is important to keep things in the prospective because the FDI has been increasing steadily over the past several years, and now we are seeing an even minor dip is reflective of some change of mind or change of some confidence in Chinese economy going forward.

The IMF just cut its world growth forecast for the year to 3.5%, citing fears of a worsening Euro debt crisis AND a lower than expected growth momentum from emerging economies like China. The external economic condition is becoming severe, especial given that the Euro Zone crisis or the Euro crisis is remaining large and un-resolved. It will be a few more months to go before we can see any clear picture down on the end of the horizon. Domestically, China is trying very hard to push out a series of measures to push the economy. Apart from the regular monitory and fiscal policies, the Chinese government is trying to reform the taxation system, so that they can give back more expenditure or expendable incomes to back to the population, so that the domestic consumption could sooner rather than later come to replace the Chinese economy’s reliance on the external demand.

We all know what has happened in 2009, back then, we pushed out a series of very aggressive stimulus packages and to the economy would have to take the consequence of that. So right at the moment, the economy would still be paying more attention to how to better and probably not necessary fast to reform the economic growth from the external to internal or the domestic consumption. So trying to improve the infrastructure to make people feel safe, and trying to spend more money. The ultimate way of stimulating Chinese economy is in the long run.