What does China’s May FDI tell us?

With the rhetoric over currency back up again, scant attention is paid towards real economic data. China has just released its May foreign direct investment data and it certainly warrants more examination than what the WSJ has given it.

Yes total FDI for the 1st 5 months were up only 14% YOY, and from a low base at that. But things become more interesting once you breakdown the data. Manufacturing FDI  actually slipped 4% during the 1st 5 months, not surprising as China’s cost advantage is eroding fast. However, FDI in the service sector was UP by a whopping 32%! The economic rebalancing act is working at warp speed. In fact, 58% of respondents to an earlier survey conducted by the US Chamber of Commerce saw market access as the primary incentive for investing in China.

Of course the transition will be bumpy, but the Chinese consumption story will drive economic storytelling for the coming decade.