The quarterly update comprehensively analyzes and assesses China’s macroeconomic data and trends. It also reviews China’s foreign domestic investment (FDI) situation and summarizes inbound M&A activity in the first quarter of 2013.
As of March 31, 2013, the overall Chinese economy grew by 7.7 percent, which is 0.3 percent less than consensus forecasts. Capital investment remained the main driver behind China’s economic growth and the trade surplus posted a substantial year-on-year increase, but slower consumer spending was the primary reason for the contraction versus forecast. Economic sustainability will be tested in the upcoming quarters to ascertain if consumer spending will return, or if the slowdown in consumer spending will contribute to further contractions.
Foreign direct investment (FDI) into China grew by 1.44 percent year-on-year, reaching USD 29.9 billion by the end of the first quarter. Despite the relatively flat aggregate growth, there were positive signs of a rebound in FDI. Both, February and March posted FDI growth of 6.3 and 5.7 percent respectively, bucking the trend of 15 straight months of negative or flat FDI growth. FDI was bolstered by steady growth in China’s service industry, increasing by 2.6 percent in the first quarter. Meanwhile, China’s manufacturing industry bounced back from its negative growth trend, also increasing by 0.6 percent in the first quarter. If FDI in the services and manufacturing industries continue to grow at these levels, the government-set goal of FDI hitting USD 120 billion would be met by the end of the year, breaking the record level of USD 116 billion set in 2011.