Foreign direct investment in China dropped 36.52 percent in November from a year earlier to US$5.32 billion, the Ministry of Commerce said today.

The sharp contraction was another sign of the faltering global economy, in which foreign investors are keeping their funds at home to avoid possible losses, analysts said.

In the January-November period, FDI in China still rose 26.29 percent on an annual basis to US$86.42 billion. Newly established foreign-invested enterprises decreased 27.51 percent to 24,952 units in the period.

In November alone, the number of newly established foreign-invested companies saw a drop of 38.32 percent year on year to 2,216 units.

"The withdrawal of foreign investment is expected because of the dim outlook of the global economy. It prompts investors to put a freeze on new projects and protect their assets," said Tang Yonggang, an analyst with Hongyuan Securities Co.

"However, such a sharp contraction of foreign investment is unexpected because we used to consider China as the world's most attractive place for investment. We did not expect such huge damage from the global financial crisis," Tang added.

China's gross domestic product grew 9.9 percent in the first three quarters, remaining the world's fastest expanding major economy as other countries such as the United States entered a recession.

The country's top policy makers have set a growth target for next year at above 8 percent, a figure that many financial institutions believe is achievable.

Also, the central government is trying to stimulate domestic demand to drive the future economy as export and investment growth may slow further amid the crisis.

Tang said foreign investment may decline for a period, especially during the first half of next year when China's real economy may experience a slowdown as exports falter.

"But when investors realize China remains a good place to invest, the capital will return," said Tang.

(China Daily December 10, 2008)