Where's the hot money going? China--no surprise--and its service sector--surprise

11/22/2010 10:47 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com



Want to know where all those hot dollars are headed?

Looks like a lot of it is winding up in China’s real estate market. No surprise and nothing different there.

Foreign direct investment in China’s real estate sector climbed by 48% in the first 10 months of 2010 from the same period in 2009, according to China’s Ministry of Commerce.

In the first nine months of the year 498 new foreign property companies set up in China, accounting for $17 billion in foreign direct investment. Most went into residential housing.

That’s just part of the overseas money going into China. In the first 10 months of 2010 total foreign investment grew by almost 16% from the same period in 2009. In October overseas investment was $7.6 billion, a 7.5% increase from October 2009.

What’s different recently is a slight change in the mix of investments that might be a sign of a shift in sentiment by overseas investors. In 2010 45% of foreign direct investment went to the service sector. In that same period in 2009 investment in the service sector accounted for only 40% of the total.

Foreign investment in the manufacturing sector dropped to 47% of the total from 53% in the same month of 2009.

About 47 percent of foreign investments ended up in the manufacturing sector from January to October, compared with 53 percent in the same period of 2009.

On this data it’s way, way too early to tell for sure, but foreign investors might be anticipating China’s frequently talked about but never quite executed shift in its economy from manufacturing for export to domestic consumption.

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