Why China's foreign direct investment inflows disappoint in August

It came in almost flat.

According to BBVA Research, China August FDI inflows disappoint, but remain robust for the year. FDI inflows were almost flat in August compared to a year ago (0.6% y/y vs. consensus: 12.5% y/y).

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The data come after a sizable jump in the previous two months (21.7% y/y in Jun-Jul), and the inflows have been resilient year-to-date (+6.4% vs. -3.7% for the full year of 2012).

Inflows have grown most notably in the services sector (up 13.5% ytd y/y), and remained sluggish in manufacturing (-3.3% ytd y/y). Meanwhile, outward FDI remains resilient, up by 18.5% ytd y/y (vs. 12.6% in 2012).

Since 2012, China has become the world’s third largest FDI provider (after the US and Japan), and the US became China’s second largest FDI recipient after Hong Kong.

On September 6, the US Committee on Foreign Investment approved China’s largest-ever purchase of a US company, Smithfield Foods, worth $4.7 billion. The deal now awaits approval by Smithfield’s shareholders.