FDI by overseas Chinese to dip

Foreign direct investment (FDI) by overseas Chinese will slow down in 2012 due to policy curbs on the real estate industry, a government report said Thursday.

Investments from overseas Chinese grew at the highest pace in the property sector among all industries in the past decade, according to the report published by the Overseas Chinese Affairs Office of the State Council.

The mainland drew a record $116 billion in FDI in 2011, of which 20 percent went to the property sector and mainly came from overseas Chinese, the report said.

"Overseas Chinese are interested in investing in property partly due to traditional Chinese thinking that owning a house is better than renting," Sun Fei, director of the Chinese Enterprises Overseas Development Center, told the Global Times.

"Excessive liquidity in the global market in the past years had generated enough cash to invest in the booming mainland property market," he said.

In general, FDI by overseas Chinese continued to grow in the past seven years and reached a record high in 2011, accounting for 65 percent of the total FDI last year, the report said.

The report attributes the high growth of investment by overseas Chinese to several factors: Familiarity with the business environment in the mainland, good relationships with local governments and acute sensitivity to domestic policy adjustments.

"Because of such factors, overseas property investors mainly come from countries and regions like Hong Kong, Taiwan and Singapore," Li Zhanjun, director of the Shanghai-based E-house China R&D Institute, told the Global Times.

But the report warned that the growth rate of overseas Chinese investment will slow down this year, due to policy curbs on the property market.

In the property sector, FDI fell sharply by 9.3 percent in the first seven months of 2012 compared with the same period of 2011, data from the Ministry of Commerce showed.

"Policy curbs on foreign investment in the property sector and the sluggish real estate market have resulted in the drop in FDI inflows," Li said.

The report also warned that the yuan's appreciation against the US dollar and rising costs in the manufacturing industry have continued to squeeze overseas Chinese businessmen's profit margins.

"Though FDI in the property sector grew fast, the manufacturing industry is a traditional investment target for overseas Chinese, and developments in this sector should be closely watched," Feng Pengcheng, a professor at University of International Business and Economics, told the Global Times.

The National Development and Reform Commission implemented an FDI guideline in January, which encourages investments in high-end manufacturing, services and emerging industries.