In an effort to attract foreign direct investment (FDI), China gave local governments more authority to approve incoming overseas capital. The simplification of the approval process comes after four months of falling FDI to China as U.S., European and Japanese companies cut investments in factories and workers in China. Local governments will be allowed to approve some setups of foreign-invested ventures and increases in existing investments. The investment threshold for local government approval of foreign acquisitions will also be raised to $100 million in FDI encouraged industries and $50 million in others.
China’s industrial-output grew a mere 3.8 percent in January and February as compared to last year. The official statistics released today confirmed analysts’ warnings of slower industrial growth. In December, output rose 5.7 percent. Declining exports and falling consumer prices complemented the bleak statistical picture. The positive news is a surge in bank lending. New lending quadrupled in February to RMB 1.07 trillion from a year earlier as China’s stimulus package began to take effect.
Combined sales in the retail and wholesale sector grew 15.2 percent in January and February. Total sales for the first two months this year rose to RMB 2.008 trillion. For statistical reasons, January and February are usually combined to avoid distortions as the Chinese New Year holiday is scheduled after the lunar calendar and falls on different dates each year.
U.S. Treasury Secretary Timothy Geithner urged G7 officials to ease their protest against China’s currency policy. Mr. Geithner’s effort comes just weeks after he publicly accused China of “manipulating” its currency. His accusation sparked wide criticism among Chinese officials. The treasury under Mr. Geithner now emphasizes China’s role in stabilizing the global financial system.
