U.S. investment in China has fallen 19.7%, and U.S. foreign direct investment (FDI) during January to July fell to $1.94 billion, according to China Daily.
Meanwhile, the rate of U.S. companies setting up businesses in China fell to 844, a 4.74% year-over-year decline in the January to July period.
EU investment in China grew, but at a marginal 1.36% in the first seven months of the year. And this came against a 23.67% increase in investment from countries in the Asia-Pacific region, showing the impact that the debt crisis in the eurozone and America’s weak economic recovery is having on the Asian giant.
Foreign and domestic investment accounts for 65% of China’s GDP, and analysts have long said that China needs to look to domestic consumption to drive economic growth, instead of foreign investment.
Chinese Premiere Wen Jiabao acknowledges this, and Today Online quoted him saying that China’s growth model is on ‘all counts unstable, unbalanced, uncoordinated and ultimately unsustainable’.
Foreign investment has been blamed for driving up inflation and fueling the property bubble. But the investment outlook is expected to pick-up according to data published by the Commerce Ministry. The fear for now is that a drop in investment could cut down manufacturing jobs in China.