China faces 'no capital flight', says Commerce Ministry

Photo taken on March 16, 2014, shows yuan (central) and other currencies in the picture. [Photo/IC]

China has again ruled out the possibility of massive capital outflow, saying an overwhelming majority of foreign companies that pulled out their investments in the country were shell firms, The Beijing News reported on Wednesday.

The average investment scale of those firms is relatively small, and 20 percent of them entered China less than five years ago, said the newspaper citing Tang Wenhong, head of the Department of Foreign Investment Administration of the Commerce Ministry.

Tang added that only 19 foreign companies out of the top 1,000, based on their 2010 revenue in China, have canceled their investments in the country so far, 10 of which have been turned into domestic enterprises via shares transfer.

Statistics from the ministry showed that foreign direct investment (FDI) into China stood at 273.6 billion yuan ($44.07 billion) in the first four months this year, an increase of 11.1 percent from a year earlier.

Tang's comments came as media reports claimed that China was suffering continued "capital flight" in the past few months amid the country's economic slowdown - a "new normal" during the country's economic restructuring.

Panasonic Corp announced in January that due to slowdown in market and price competition it had stopped making televisions in China.

Shortly on its heels, Microsoft decided to gradually shut down Nokia's two smartphone production line, and Japanese watch maker Citizen closed its factory in South China's Guangzhou city.

Experts said that despite capital withdrawal of some foreign companies, investment fever in China remains high, especially in the country's high-end manufacturing and service sectors.

The newspaper said that big international companies such as Volkswagen, Botch, Chrysler, Foxconn and Amazon have all expanded their investment in China this year.

FDI into the service sector reached $28.1 billion in the first four months this year, a growth of 24.8 percent from a year earlier.