May 14 (Bloomberg) -- Foreign direct investment in China, the world’s fastest-growing major economy, climbed for a ninth month in April as the government relaxed rules to lure investors amid a sustained economic expansion.
China’s growth quickened to 11.9 percent in the first quarter, the fastest pace in almost three years, driven by stimulus spending and a credit boom unleashed last year. Land price discounts and investor expectations that the Chinese currency will appreciate may attract more foreign investors.
“China will see a continued recovery in FDI as global growth is improving and China is leading it,” Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong, said before the report. “This, combined with China’s growth potential, makes the country a very attractive investment destination.”
The State Council, the nation’s Cabinet, last month announced measures including preferential policies for land use and tax breaks, to attract foreign investment into “encouraged categories” such as renewable energy, high-technology and service industries in central and western China.
Investment Approvals
The government also allowed local authorities to approve foreign investment projects of as much as $300 million, compared with the previous cap of $100 million.
China, poised to overtake Japan as the world’s second- largest economy this year, replaced the U.S. as the world’s largest auto market in 2009. Growth of retail sales, a gauge of consumer spending, quickened to 18.5 percent last month from a year earlier, according to government data.
Chen Xiao, the chairman of Gome Electrical Appliances Holdings Ltd., the nation’s largest electronics retailer by stores, said this week that sales are “strong” and will accelerate, bolstered by government subsidies.
Tesco Plc, the U.K.’s largest retailer, plans to make China a central part of an accelerated international expansion to fuel sales growth as its share of the domestic grocery market plateaus, spending $3.9 billion over five years opening Chinese shopping malls and hypermarkets, Finance Director Laurie McIlwee said April 20.
Europe’s Woes
“Europe’s fiscal woes have highlighted the decline in competitiveness and world standing of the developed world, increasing the relative attractiveness of successfully managed emerging-market economies as an investment destination,” Kowalczyk said, adding that expected appreciation of the Chinese currency may also add to capital inflows.
China may relax the yuan’s peg to dollar this month to head off criticism of its currency policy during May 24-25 talks with the U.S. and help tame inflation, Royal Bank of Canada and Wells Fargo & Co said this week.
China halted the currency’s 21 percent, three-year advance against the dollar in July 2008 to help exporters weather a global recession and has since kept the exchange rate at about 6.83. Speculation that the policy will change intensified after U.S. Treasury Secretary Timothy F. Geithner last month delayed a report that could brand China a currency manipulator and paid an unscheduled visit to Beijing to meet with Chinese Vice Premier Wang Qishan.
Foreign-invested companies accounted for 28 percent of the nation’s industrial output and 56 percent of exports in 2009 and directly employed 45 million people, according to government data.
