This quarterly update comprehensively analyzes and assesses China’s macroeconomic data and investment trends. Specifically, it reviews China’s gross domestic product (GDP), foreign direct investment (FDI), and inbound M&A activity through the first half of 2013.
China’s GDP grew by 7.5 percent in the second quarter of 2013, and 7.6 percent through the first half of the year. Although second quarter growth met expectations, it confirmed that China’s key growth drivers continued to lose momentum. Industrial output and capital investment also continued to slow; China’s Manufacturing Purchasing Managers’ Index (PMI) and the HSBC Flash PMI index both declined, indicating more caution and less confidence amongst small- and medium-sized businesses and producers. Consumption was a bright spot, as total retail sales of consumer goods posted subsequently higher growth rates through the months of April, May, and June. Consumption could play a more positive role in the second half of the year, if industrial output continue to flatten or decline.
FDI into China grew by 4.9 percent year-on-year, reaching US$61.98 billion by June 30, 2013, compared to US$45.6 billion in outbound direct investment (ODI). Positive signs of a rebound in FDI were evident at the end of the first quarter, and continued to show strength through the second quarter. As of June 30, 2013, FDI has posted five consecutive months of year-on-year growth; FDI in June grew by over 20 percent year-on-year, representing the highest monthly growth rate in over two years. FDI was again bolstered by steady growth in China’s service industry, increasing by 12.6 percent YTD through the first half of the year. Meanwhile, FDI in manufacturing slipped, decreasing by 2.14 percent through the first half of the year. If FDI in the service sector continues to receive consistent investment through the second half of the year, the government-set goal of reaching US$120 billion in FDI would be met by the end of the year, breaking the record level of US$116 billion set in 2011.