The quarterly update comprehensively analyses and assesses China's macroeconomic and inbound investment situations. It also analyses important macroeconomic data and trends, specifically the Chinese foreign domestic investment (FDI) trends, as well as reviews and summarises inbound mergers and acquisitions (M&A) for 2012.
As of Q4 2012, the overall Chinese economy began to stabilise and established positive momentum, with capital investment remaining the main driver behind China's economic growth and stability. Although the trend of economic recovery is discernable, structural problems constraining economic growth still exist. Thus, the sustainability of economic growth will need to stand the test of time.
For the first time since 2009, FDI into China decreased year-on-year. In 2012, FDI inflows totaled USD 111.7 billion, down approximately 3.7 percent from China's all-time high of USD 116 billion in 2011. However, FDI inflows are still at extremely high levels compared to previous years; yet after the buoyant growth of the last two decades, it should be no surprise to see some sort of leveling off. What will be interesting to witness is the future trend of the two largest components of FDI, manufacturing and services. Together they make up over 90 percent of FDI, and they seem to be trending in different directions; manufacturing FDI has decreased year-on-year and services (ex real estate) has increased year-on-year, which bucks the trend of total FDI in 2012. With the new government taking its position in March 2013, updates to policy, trade and further economic liberalisation should also have an effect on services and manufacturing FDI.