chinese car engine factory.jpgForeign direct investment in China fell for the eighth consecutive month in May. Compared to May 2008, FDI dropped almost 18% to $6.4m while the number of new approved foreign companies also dropped, by a startling 32% to 1,649, according to China's commerce ministry.

2008 marked something of a highwater mark for investment in China's economy and FDI rose almost 24% to $92bn. But by the end of the year, the stimulus provided by the Olympics had passed and signs that the world economy was heading for trouble were clearly evident, forcing many western businesses to postpone or cancel investment in China.

Interestingly, China's share of FDI has been dropping in recent years. While it remains the lead destination among emerging economies, it accounted for just 18% of the total compared to 30% five years earlier.

Clearly, Chinese officials hope that May 2009 marks the low point for FDI and it was the first time since the Asian financial crisis of a decade ago that the three main investment indicators – actual foreign direct investment, contractual foreign investment and new approved foreign companies – all declined.

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