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BNN Bloomberg: For the first time since the record-keeping started in 1998, China has experienced a negative turn in foreign direct investment (FDI), as indicated by a $11.8 billion decline in direct investment liabilities. This shift reflects foreign entities’ reduced inclination to reinvest profits within China, a trend driven by geopolitical strains and more attractive investment returns elsewhere due to higher interest rates in advanced economies, contrasted with China’s own rate cuts to boost its economy. This sentiment is echoed in the reported 8.4% year-on-year decrease in FDI inflows to China, according to commerce ministry figures.
The drop in reinvestment is partly attributed to international firms, particularly from the US, diversifying supply chains away from China. Furthermore, foreign-invested industrial companies in China are facing decreased profits, attributed to falling export values and a domestic property downturn. Such economic indicators suggest a concerning trend of divestments outpacing new investments.
Despite these challenges, China is actively courting foreign investment to advance its economic development, with high-level engagements including President Xi Jinping meeting with business leaders like Bill Gates. Nevertheless, foreign business communities in China are advocating for more substantial reforms to address issues such as protectionism, regulatory unpredictability, and security-related crackdowns.
The outlook remains cautious as portfolio investment and other investment channels have also seen outflows, with foreign investors selling off Chinese assets, influenced by less favorable interest rate differentials. The data implies sustained capital outflow pressures, painting a more complex picture for China’s economic engagement with global investors.
The entire article can be read at the link https://www.bnnbloomberg.ca/china-foreign-investment-gauge-turns-negative-for-first-time-1.1993567#:~:text=(Bloomberg)%20%2D%2D%20A%20measure%20of,and%20higher%20interest%20rates%20elsewhere.
