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China overseas investment almost doubles in September: govt
by Staff Writers
Beijing (AFP) Oct 16, 2014

China bank lending picks up in September: central bank
Shanghai (AFP) Oct 16, 2014 - China's banks stepped up their lending in September, the central bank announced Thursday, but analysts said more monetary easing was needed to bolster the weakening economy.

Domestic banks extended 857.2 billion yuan ($139.9 billion) in new loans, the People's Bank of China (PBoC) said in a statement, up more than a fifth from the 702.5 billion yuan lent in August.

The September figure also beat a median forecast of 745 billion yuan from a Wall Street Journal poll of 15 economists.

Analysts attributed the rebound in new lending to China's "targeted" easing introduced earlier this year, which included cuts in reserve requirements for some banks.

Last month also saw the PBoC pump 500 billion yuan into the country's top five banks in a bid to boost lending to small businesses and kickstart the economy.

"New loans have recovered to the normal level, probably reflecting the ongoing targeted easing by the PBoC," ANZ economists Liu Ligang and Zhou Hao wrote in a research note.

But total social financing, a broader gauge of credit in the overall economy, remained "lukewarm", they said.

Social financing stood at 1.05 trillion yuan for September, the PBoC said, down from 1.4 trillion yuan for the same month a year ago.

"This suggested that the de-leveraging of shadow banking activity continues," ANZ said.

Authorities have sought to crack down on "shadow banking" -- a huge network of lending outside formal channels and beyond the reach of regulators, including activities by online finance platforms, credit guarantee companies and microcredit firms.

"Credit demand from the real economy remains weak," Ma Xiaoping, Beijing-based economist for British bank HSBC, told AFP.

"There's room for further easing on the policy front, and the central bank is more likely inclined to the targeted approach," she said.

Separately, the central bank also said China's foreign exchange reserves slipped to $3.89 trillion at the end of September, from $3.99 trillion at the end of June.

China has the world's largest foreign exchange reserves, the bulk of which are believed to be held in US dollars.

Analysts said the decline was unexpected, but were divided over the possible reason.

ANZ said it might have been caused by the central bank selling US dollar reserves.

"It appears that China's central bank (has) sold USD reserves, reflecting the PBoC's intention to reduce its foreign reserve assets," it said.

But Capital Economics suggested the fall did not mean the PBoC had started to offload part of its reserves, saying the change was caused by a weaker euro and Japanese yen.

China's overseas investment almost doubled year-on-year to $9.79 billion in September, the government said Thursday, again exceeding incoming funds even though they recovered from multi-year lows.

Foreign direct investment (FDI) -- which excludes financial sectors -- into China came in at $9.01 billion for the month, the commerce ministry said, up only 1.9 percent year-on-year but a significant improvement on August's $7.20 billion, which was the lowest since July 2010.

China has been actively acquiring foreign assets, particularly energy and resources, to power the world's second-largest economy, with firms encouraged to "go out" and make overseas acquisitions to gain market access and international experience.

Overseas direct investment (ODI) was up 90.5 percent in September, and officials have said it could exceed FDI this year.

For the first nine months total ODI stood at $74.96 billion, up 21.6 percent, with FDI at $87.36 billion, down 1.4 percent.

Over the period, Chinese investment into the European Union soared 218 percent to $9.0 billion, the ministry said.

For Japan it leaped 150 percent into Japan, while also going up 69.7 percent into Russia and 19.5 percent into Hong Kong, the ministry added, without giving totals.

It was up 28.2 percent to $3.95 billion into the US.

Ministry spokesman Shen Danyang attributed the rapid growth in ODI to "strong market forces" -- China's need to invest abroad and demand from destination countries -- along with policy support from Beijing and foreign governments.

"We believe China's overseas investment and cooperation will maintain a fast development momentum in the future," he said.

In the first nine months FDI fell 43.0 percent from Japan to $3.39 billion, 24.7 percent from the US to $2.17 billion, 18.8 percent from the European Union to $4.84 billion, and 13.7 percent from the ASEAN group of southeast Asian countries to $4.90 billion.

But it rose 32.5 percent from South Korea to $3.23 billion and 32.3 percent from Britain to $1.01 billion.

- Rising competition -

Chinese authorities in recent months launched anti-monopoly, pricing and other inquiries into foreign firms in sectors ranging from auto manufacturing and pharmaceuticals to baby milk.

The probes have raised concerns among investors that Beijing is targeting overseas companies, accusations the commerce ministry has repeatedly denied.

"We have always been confident in China's (appeal) to foreign investment," Shen said. "Most multi-national companies and foreign invested firms in China are also confident in the country's investment environment."

But China's appeal as an investment destination has declined in recent years in the face of rising labour and land costs and competition from other Southeast Asian countries such as Vietnam.

Chinese officials have also blamed source country factors, such as Washington's drive to move industrial production back to the US.

"Some developed countries in recent years speeded up the return of some manufacturing sectors to boost their own economy and create jobs," Customs spokesman Zheng Yuesheng told reporters this week. "This has led investment in China's relevant industries to cool."

Concerns are mounting about China's economy, after industrial production growth slowed sharply in August to its lowest level for more than five years, while house prices have fallen for five consecutive months.

Inflation in the country also fell to its lowest in almost five years last month, raising fears that deflationary pressures are rising.

The economy grew 7.7 percent last year, maintaining its slowest pace in more than a decade.

Officials are targeting economic growth of "about 7.5 percent" this year, the same as last year's objective.

The goal is normally exceeded, but senior officials have repeatedly sought to play down its significance this year.

China's third-quarter gross domestic product figures are due next week.

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