Tags: china | foreign | investors

China to Foreigners: Come Invest Here!

Tuesday, 23 Jun 2009 04:02 PM

By Julie Crawshaw

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A dramatic collapse in foreign direct investment (FDI) in China is causing concern at the top levels of government, with the powerful Ministry of Commerce proposing to relax rules to draw in more foreign capital, The Australian News reports.

The tougher rules were introduced in 2006 and 2007 to stop offshore investors from cashing in on China's surging property market.

Foreign direct investment into China was slightly more than $34 billion in the first five months of the year, down 20.4 percent from the same period last year.

Premier Wen Jiabao says the nation's economy is at a "key moment” after becoming stable but still needing "moderately loose monetary policy" and "proactive financial policies" to support its $720 billion stimulus plan.

May marked the eighth straight month that FDI inflows had fallen, but the drop was less steep than in April, when inflows fell 22.5 percent from a year earlier.

The drop in foreign investment, along with other broader reasons, is behind a slowdown in China's northeastern provinces, where there has been heavy investment from South Korea and Japan.

Malaysia's central bank could be poised to include yuan-denominated assets in its foreign-exchange reserves, The Wall Street Journal reports, providing at least a symbolic step forward in Beijing's ambitions to promote the yuan as an alternative reserve currency.

Bank Negara Malaysia limits its reserve investments to highly liquid, low-risk assets such as U.S. Treasurys and European Union government bonds.

It would be, potentially, the first central bank to buy Chinese government debt as a secure reserve.

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