Tue, Feb 20, 2024 page12

• FDI to China falls to lowest since early ’90s

  SLOWING DOWN: Last year, new investment in China from Taiwanese firms fell to its lowest since 2001, while that of Japanese firms also fell to a 10-year low

  • Bloomberg
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  Foreign businesses’ direct investment into China last year increased by the lowest amount since the early 1990s, underscoring challenges for the nation as Beijing seeks more overseas funds to help its economy.

  China’s direct investment liabilities in its balance of payments was US$33 billion last year, data released on Sunday by the Chinese State Administration of Foreign Exchange showed.

  That measure of new foreign investment into the country — which records monetary flows connected to foreign-owned entities in China — was 82 percent lower than the 2022 level and the lowest since 1993.

  

  Employees work on a washing machine production line at a factory for Chinese home appliances and consumer electronics company Haier Group Corp in Qingdao, China, on Sunday.

  Photo: AFP

  The data show the effect of COVID-19 lockdowns and weak recovery last year. In a first since 1998, the investment fell in the third quarter of last year, before recovering a bit to post growth in the final quarter.

  The administration’s data, which gauge net flows, can reflect trends in foreign company profits, as well as changes in the size of their operations in China, economists say.

  Profits of foreign industrial firms in China dropped 6.7 percent last year from the previous year, Chinese National Bureau of Statistics data showed.

  Earlier figures from the Chinese Ministry of Commerce showed new foreign direct investment (FDI) into China fell last year to the lowest level in three years.

  Those figures do not include reinvested earnings of existing foreign firms and are less volatile than the administration’s data, economists have said.

  The government’s efforts to get overseas companies to return after COVID-19 are falling short, and more would be needed if Beijing is to succeed in its aims. The continuing weakness highlights how foreign companies are pulling money out of the country due to geopolitical tensions and higher interest rates elsewhere.

  There is more incentive for multinationals to keep cash overseas rather than in China, because advanced economies have been raising interest rates when Beijing has been cutting them to stimulate the economy.

  A recent survey of Japanese firms in China showed that most of those companies cut investment or kept it flat last year, and a majority do not have a positive outlook for this year.

  Japanese companies added the least amount of net new money last year in at least a decade, with only 2.2 percent of new Japanese overseas investment going to China.

  That was less than what was channeled into Vietnam or India and only about a quarter of the investment into Australia, data released earlier this month by the Japanese government showed.

  Taiwanese firms have also become much more reluctant to add to their businesses in China, with new investment last year the lowest since 2001, government data showed last month.

  Taiwanese companies have traditionally been among the biggest investors in China, but have been cutting new capital expenditure in the world’s second-largest economy since the peak in 2010.

  South Korean firms also slashed investment into their close neighbor China last year, with new foreign direct investment dropping 91 percent in the first nine months of last year compared with the same period in 2022, falling to the lowest level since 2002.
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