While the Chinese are evidently still bullish on China, the Sydney Morning Herald is among a number of sources that published a report last month saying that multinational investors were cutting back some on investing in the Middle Kingdom and "diversifying their new investments" into countries like India, Vietnam, and other Southeast Asian nations.

Is China a has been?

China is still far and away the biggest target for Foreign direct investment. But consider this from the report by John Garnaut:

Foreign direct investment from the European Union into China fell 29.4 per cent last year, Japanese investment fell 24.6 per cent and US investment fell 12.8 per cent, says the website of the Department for Foreign Investment Administration, part of China's Ministry of Commerce.

So where's the money flowing into China really coming from? According to Garnaut, from the Chinese themselves...






China's Ministry of Commerce says foreign direct investment rose 13.6 per cent to $US74.7 billion last year, but that figure appears to be grossly inflated by mainland Chinese money being routed through offshore tax havens to exploit generous tax incentives for foreign investors. Figures from the Department of Foreign Investment Administration show investments channelled through the British Virgin Islands, Cayman Islands, Mauritius and Samoa surged 37 per cent to account for more than a quarter of all foreign direct investment last year. British Virgin Islands alone accounted for $US16.6 billion.And that's not including investment from Hong Kong.

It's an interesting story that makes you wonder how much smoke and mirrors there might be involved in measuring foreign direct investment...