Foreign direct investment flows from the United States into China are on the wane, partly as a result of the reshoring of manufacturing activity and rising labour costs, the Chinese Ministry of Commerce has said.

The decline in US investment is closely connected with the country’s economic slowdown and a preferential national policy of attracting investment to stimulate the economy, Ministry spokesman, Mr Shen Danyang, said.

This prompted some reshoring — the process of returning jobs and manufacturing to the company’s home country — of manufacturing activity, Mr Shen said while insisting this will not become a general trend, state-run China Daily reported.

However, the Ministry said overall foreign direct investment (FDI) into China increased 9 per cent year-on-year.

According to new figures, FDI in China increased to $8.33 billion in October, a rise of 8.75 per cent vis-a-vis the year-ago period.

While this was an improvement on 7.88 per cent FDI growth in September, it was lower than the 11.11 per cent expansion seen in August.

Between January and October, US investment fell 18.13 per cent year-on-year to $2.57 billion.

In contrast, investment from the 27 European Union (EU) nations increased 1.05 per cent to $5.51 billion between January and October.

“The grim economic situation in the US and EU is the major cause of the decline, or the slowing growth, of their investments in China. Faced with such gloomy prospects, many companies are unwilling to invest, or to add investment,” Mr Shen said.

“US enthusiasm for absorbing investment also provides encouragement for American businesses that own operations in China to swing back to the US and build factories there,” he said.

“The reshoring negatively impacted China’s performance in absorbing US investment in the high-end sector,” he said.

A recent report by Boston Consulting Group said 3 million new jobs will be created in the US by 2020 as Chinese labour costs rise and reshoring of manufacturing activity continues.

Experts said the rising cost of labour in China is also pushing foreign investors to move their production and investment from China to neighbouring countries.

“The reason behind the decrease (in US investment) is more likely related to foreign companies transferring production to other Asian nations, such as Vietnam and Indonesia, that enjoy lower labour costs,” said Mr Zhou Shijian, an expert on Sino-US economic relations at Tsinghua University in Beijing.

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