By Scott Hillis
BEIJING (Reuters) - Foreign investment in China fell more than half in December from a year earlier, but still rose more than 13 percent for the year as foreign firms shrugged off fears the world's seventh-biggest economy will see a hard landing.
December's investment haul of just under $3.1 billion was the lowest since July 2003, but the monthly investment figures are known for their volatility and most analysts say they prefer to look at long-term trends.
"Looking at the overall trend, foreign investors are still very keen on China despite concerns about a hard landing and the macro-controls," said Tai Hui, an economist at Standard Chartered in Hong Kong.
Monthly investment has eased in most months since hitting a record high of $8 billion in June.
But for all of 2004, foreign direct investment, or FDI, was $60.6 billion, up 13.3 percent from a year earlier, the Commerce Ministry said on its Web site (www.mofcom.gov.cn) on Thursday. Contracted FDI was $153.5 billion, up 33.4 percent on the year.
The strong FDI inflows have helped to swell China's foreign exchange reserves, which rose by more than 50 percent last year to hit $610 billion, the central bank said.
Because China's yuan
China's 2004 trade surplus accounted for another $32 billion of the rise in forex reserves, leaving more than $110 billion that analysts say consists largely of speculative funds betting that the yuan will appreciate.
Contracts for planned FDI in December rose 26.7 percent in the month from a year earlier to $18.5 billion. The monthly figures were based on comparisons with earlier ministry data.
China, with its fast-growing economy, low wages and growing middle class, has become the world's top destination for foreign investment, with companies pouring money into sectors ranging from cars to computers.
With heated domestic investment threatening to unbalance the economy, Chinese policy makers have tried to cool things off by clamping down on credit and banning some new projects in sectors like property and steel.
China raised interest rates for the first time in 9 years last October as part of an austerity program that also included steps like requiring banks to hold more money in reserve instead of lending it out.
Reflecting the impact of the credit curbs, growth in China's money supply accelerated to 14.6 percent in the year through December from 14 percent in the year through November, a level the central bank said was "appropriate" for the economy.
The figure was above the median forecast of 14.2 percent in a Reuters survey of 5 economists but was within the central bank's 2004 target of around 17 percent.
"Generally, the growth rate of the broad money supply has fallen back to a reasonable range that is basically appropriate for economic growth," the People's Bank of China said in a statement on its Web site (www.pbc.gov.cn).
Earlier this month, central bank governor Zhou Xiaochuan said China would aim for monetary growth of about 15 percent in 2005 as the government seeks to keep the economy on a sustainable growth track.
December's economic data is being watched for indications of whether another rate increase will be needed soon or if Beijing will adjust its hotly debated yuan policy later in 2005 especially if inflation rises.
China is set to release GDP figures for the fourth quarter of 2004, along with data for industrial output, consumer inflation, fixed-asset investment and retail sales, late next week. ($1=8.277 Yuan)
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