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The world invests new capital in China

By Jim Trippon

A great measure of world confidence in any economic system is foreign direct investment (FDI). Foreign direct investment is registered when a company decides to put its money on the construction of new stores, factories or other assets outside of home base. Now that's happening again in China.

For the third straight month, China has defied the recession and registered increases in FDI.

Investment rose by 5.7 percent to $7.1 billion, the Ministry of Commerce says compared with $6.7 billion in October 2008. China's FDI jumped by 18.9 percent in September to $7.9 billion. The three-month increase indicates that foreign corporate confidence in China has firmly turned around.

China registered its fastest economic growth in a year during the third quarter. The country's economy expanded 8.9 percent during that quarter, October industrial production grew at the fastest pace since March 2008, and retail sales growth accelerated to 16.2 percent, strengthening the nation's recovery in an important domestic growth focus.

"China's recovery story will continue to appeal to investors," Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai told Bloomberg. "Foreign fund inflows are also increasing, betting on the real estate market and the currency." Yuan forwards indicate the currency will climb 3.6 percent against the dollar in the next year, Bloomberg predicts.

China has approved the establishment 18,163 overseas-funded enterprises in the first ten months of this year. It approved 1,815 foreign enterprises in October alone.

The FDI actually used nationwide in the first ten months amounted to $70.87 billion. That's down 12.6 percent from the same period of 2008. China saw investment inflows down for 10 straight months from October last year to July due to the global economic slowdown.

The three-month surge in FDI indicates both a recovery in confidence in China and recovery in global industry.

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