The European economy is now taking a registered toll on foreign direct investment (FDI) into China, according to data from the Chinese Ministry of Commerce released on Tuesday.
China's inbound investment for March dropped 6.1% from a year earlier to $11.76 billion.
That drop marks the fifth consecutive month as the European debt crisis continues to surprise to the downside and corporate investors there hold off on investing in a slower-growing China.
The Ministry of Commerce even said that the FDI outlook remains “grim” in the coming months, according to a report in China Daily on Wednesday. Government officials remain eager to apply any means necessary to keep foreign funds flowing by encouraging multinational companies to invest in lower cost central and western states. China's coastal cities, while still an important destination for FDI, are becoming too costly as the economy matures.
Europe is the main culprit behind the lackluster FDI data, however. Investment from European Union companies fell 31.2% in the first quarter from a year earlier to $1.41 billion. The EU's decline has not been compensated by a stronger US According to government figures, capital flow from the US multinationals rose 10.1% in the first quarter to $893 million, reversing a falling trend over the last few months.