Chinese Foreign Investment Bubble About to Burst?


Are we about to see another Asia market collapse this time as a result of China? You wouldn’t think so with the continued surge in foreign investment. China drew a record $63.0 billion in foreign direct investment in 2006, up 5 percent from 2005, the official Xinhua news agency cited.

It gave no figure for December alone, but China reported cumulative FDI of $54.26 billion in the first 11 months, pointing to December FDI of around $8.74 billion. No signs of slowing or revaluating; it doesn’t appear investors are worried.
In all of 2005 China drew $60.33 billion in FDI, down slightly from the previous record of $60.6 billion in 2004. The figures cited by the Commerce Ministry do not include investments by foreigners in the financial sector.

To address the continued pressure of revaluation of the yuan, Beijing, is trying to encourage capital outflows to ease the upward pressure on the yuan , has been encouraging its companies to invest abroad to secure resources, build brands and win market share. More discussion in the economics forums.

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