Foreign direct investment in China rises to 33% on the rapid growth

April 19, 2011, 1: 04 am EDT by Bloomberg News

(Updates with comment from Economist in the fourth paragraph).

April 19 (Bloomberg) - foreign direct investment have climbed to 33% in March from the previous year, rising inflation and interest rates have not overseas wet confidence in the world fastest-growing major economy.Foreign investment added $ 12.5 billion in the Chinese economy, the Ministry of trade said in a statement in Beijing today. Investment grew at an annual rate of 29 percent in the first quarter.The Chinese Central Bank said the April 17 would ratchet of the reserve requirements of lenders for the fourth time this year to prevent the excess liquidity fueling inflation which has accelerated the fastest rate in nearly three years in March. Wal-Mart Stores Inc. said last month that he can buy more land to build shops of the most populous nation of the world, which it predicts will be the most large grocery by 2014.Chine market exceeds the growth of other large economies of the world"Consequently, investment flows are continuing,", said David Cohen, an economist based in Singapore economics of the Action, who previously worked for the US Federal Reserve. "It will need to raise reserve requirements more in the course of the coming months to absorb the influx, so that it does not trigger an increase in inflation."Cohen expects China to raise the ratios of requirement of reserve banks 50 point basis in June and two to three times in the second half this year.Record RatioThe last increase in reserve ratios will enter into force on 21 April, pushing the requirement of a percentage of 20.5 record for the largest lenders.China has increased interest rates four times since October, to curb inflation which has accelerated at a 5.4% annual pace in March. Liquidity remains "excessive", Governor Zhou Xiaochuan said in Beijing yesterday evening, a day after the Bank of China announced the fourth increase lenders reserve ratios this year.The rise of investment will lead to "more political pressure for Beijing to continue to allow the appreciation of the yuan", said Cohen. gradual appreciation of the nominal exchange rate of the yuan against the US dollar will help the country overcome the inflationDeputy Governor of PBOC Yi Gang said on April 15. The Chinese Central Bank former Advisor Yu Yongding said this month that China should allow its currency strengthen the dollar to keep a lid on consumer prices. $ 3 trillion ReservesThe important economy experiencing the most rapid growth is attracting money from investors betting on the strength of its expansion and earnings prospects in the yuan. China's exchange reserves jumped to a world record 3 billion dollars in March, a level that exceeds the needs of the nation, Zhou said after a speech at Tsinghua University in Beijing yesterday evening.Gross domestic product expanded 9.7% in the first quarter of the previous year, exceeding the estimate of 9.4% economists, arguing the case for monetary tightening more. "China is still not done tightening,"Said Qu Hongbin, Chief Economist of HSBC Holdings Plc in Hong Kong China, before the release of today." "Inflation is likely to accelerate even prior to the commencement of cooling," he said, predicting increases in the rate of reserve half percentage point from months and reference interest rate quarter-point boost.Starbucks Corp., most large operator of coffee-shop in the world, said it aims to expand their presence in China by increasing the number of outlets in China to 1,500 by 2015.

-Chinmei Victoria Ruan, Zhang Dingmin, Sung, Sophie Leung. With the help of Jay Wang. Editors: Lily Nonomiya, Thomas Cherian

To contact the reporter on this story: Chinmei sung in Taipei to csung4@bloomberg.net.

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong to the ppanckhurst@bloomberg.net

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