At the routine press conference of the Ministry of Commerce（MOFCOM）on May 17， it was released that the investment from the US to China from January to April witnessed decline. During the period， 475 companies were set up， down by 3.85% year on year and the real investment amount was US$1028 million， decreased by 28% year on year.On June 15， the Ministry of Commerce（MOFCOM）officially released the utilization of foreign investment in China from January to May in 2011. According to Yao Jian， the spokesman of MOFCOM， the investment from US to China from January to May continued to be in decline， with the total investment for the past five months in 2011 as US$1285 million， down by 24.12% year on year. In contrast， in the same period， the investment from ten Asian countries (regions) including Hong Kong， Macao， Taiwan， Japan， Philippines， Thailand， Malaysia， Singapore， Indonesia， and South Korea reached US$41.236 billion. an increase of 29.28% year on year， and the investment from 27 EU countries amounted to US$2.929 billion， an increase of 9.02% from the previous year.Compared with the on-going increase of investment from Asian countries and regions as well as the EU countries， the decline of US investment in China deserves concern. So what factors accounted for the decline of US investment in China? Will this be a trend?When asked for analyzing the reason for this phenomenon， Yao Jian gave his explanation. According to Yao， China’s major investment source is the ten Asian countries， and Japan and South Korea rank in the next place. However， the US and EU countries have increasingly become the important investment source， especially play considerable role in terms of advanced technology import. Actually even though ten Asian countries are the major source of China’s inbound FDI， most of the companies in this area which invest in China have close connection with the US， EU and Japan， therefore， the data could not completely reflect the reality. “Certainly we can not deny the fact that the US companies’ investment in China indeed declined. As for the reason， in my opinion， the decline is mainly relevant to the backdrop of the American economic environment. Though since the breakout of financial crisis in 2009， the American economy has been recovering， however， to restore to the pre-crisis condition still needs time. In this circumstance， the American MNCs also have to take their domestic economic condition into account when making the strategic arrangement，” said Yao Jian.Christian Murck， President of the American Chamber of Commerce-China(AmCham-China)， expressed his view on this question. His answer was consistent with Yao’s view. Murck explained that in general， there are two reasons for the American companies to invest in China: 1) to supply demand in the US， the EU， or other international markets; or 2) to provide goods and services for the Chinese market. Demand in the US and other international markets continue to be weak. Even though American corporations have recovered from the financial effects of the global crisis and have substantial amounts of cash on their balance sheets， they are so far investing cautiously to serve the US and other markets outside China. Weak external demand may be one explanation for the decrease in direct investment from the United States.“Sharp falls in American investments also occurred elsewhere around the world because the US is concluding its quantitative easing policies，” said Li Maoyu， an analyst at Changjiang Securities Co.“Increasing investments from other countries demonstrate that China remains an attractive destination for foreign investment，” Li said.Murck expressed that operating conditions in China are excellent for their member companies. “85% of our members report revenue growth in 2010 compared to 2009， and 63% report better operating margins. We anticipate continued growth in China， therefore it is not surprising that 83% of our members plan to expand operations in China. China remains the highest global priority for investment for 31% of our member companies， and an additional 47% rank China in the top three globally. Many AmCham-China member companies have invested in China for many years and now have profitable operations. Accordingly， some of the investment for this market is self-funded by reinvesting profits earned in China. That may be a second explanation for the decrease.” Murck told the reporter.The decrease of growth rate for processing trade is likely to account for the decline of the US investment in China to some extent. In May， the export under the category of processing trade registered US$67.69 billion， increased by 11% year on year and a year-on-year 3.3% down from last year in terms of the proportion in the total export. This has something to do with that the companies of the developed countries including the US began to shift their order to other countries and regions. For example， Sleek Audio Company， based in Florida US， of which the products once mainly were produced in Dongguan， China， dropped their production in Dongguan this year and signed another manufacturing company in Florida instead. The American toy producer Wham-O also decided to shift 50% of the Frisbee and hula-hoop order to the US domestic companies this year while these orders were placed to the factories in China previously. It is estimated by some American companies that taking into account of the rising transportation cost， quality control as well as the extra management cost incurred by unable to deliver the products in time， outsourcing actually did not save cost.Though the data appeared a little pessimistic， the temporary decline of the US investment in China doesn’t necessarily mean the American companies would give up tapping the gold pool of China’s market . When asked whether this kind of decline would become a trend， Yao Jian said he could not give this conclusion. The President of AmCham-China， Murck also expressed that it was too early to conclude this is a trend and they would continue to study the data. Tu Xinquan， Vice Dean of WTO Research Institute of University of International Business and Economics also told the reporter that the period was still short to make a conclusion and still waited to see the situation later.With the processing trade in China on the decline， the US and China， base on the China’s market， would have more opportunities to seek more cooperation in the emerging sectors such as service industry.Ted Dean， Chairman of AmCham China said that according to the latest data， the financial status of the American companies operating in China in 2010 had rebounded to the pre-crisis level. Meanwhile， he showed great interest in China’s goal of building innovative economy and realizing more balanced economic growth.“The service industry in US and European countries is well developed， therefore， how to make the service industry more attractive to the investors from the US， Japan and European countries needs our further efforts，” said Yao Jian.He also expressed that with the investment in service industry gradually accounting for the largest share in the three industries， China should study how to further expand the opening up of the service industry and further optimize the investment environment to promote the US， Japan and European countries to further expand investment in service industry in China.Note: AmCham-ChinaThe American Chamber of Commerce in the People’s Republic of China (AmCham-China) is a non-profit organization which represents US companies and individuals doing business in China. AmCham-China’s membership comprises more than 2，600 individuals from over 1，200 companies. The Chamber’s mission is to help American companies succeed in China through advocacy， information， networking and business support services.
