Foreign companies pulled more money from China last quarter, a sign that some investors are still pessimistic even as Beijing rolls out stimulus measures aimed at stabilizing growth.
China’s direct investment liabilities in its balance of payments dropped US$8.1 billion in the third quarter, data released by the Chinese State Administration of Foreign Exchange showed on Friday. The gauge, which measures foreign direct investment (FDI) in China, was down almost US$13 billion for the first nine months of the year.
Foreign investment into China has slumped in the past three years after hitting a record in 2021, a casualty of geopolitical tensions, pessimism about the world’s second-largest economy and stronger competition from Chinese domestic firms in industries such as cars. Should the decline continue for the rest of the year, it would be the first annual net outflow in FDI since at least 1990, when comparable data begins.
Photo: Reuters
Companies that have pulled back some China operations this year include automakers Nissan Motor Co and Volkswagen AG, along with others such as Konica Minolta Inc.
Nippon Steel Corp in July said it was exiting a joint venture in China, while International Business Machines Corp said it is shutting down a hardware research team in the country, a decision affecting about 1,000 employees.
The prospect of an expanded trade war and deteriorating relations with Beijing during US president-elect Donald Trump’s second term might further weigh on investment.
“Geopolitical tension” is the topmost concern for members of the American Chamber of Commerce in Shanghai, group chair Allan Gabor said.
“It makes it difficult to plan big investments, but on the contrary, we see a lot of members making small and medium-sized investments,” Gabor said in an interview with Bloomberg TV last week during the China International Import Expo. “It’s a much more surgical investment environment.”
Still, government efforts in late September to stimulate the economy have already benefited one group of foreign investors, with the value of stocks held by foreigners jumping more than 26 percent from August,
China’s central bank data showed. The Chinese benchmark stock index gained almost 21 percent in September after the start of a coordinated stimulus effort, although it has since given up some of those gains.
By contrast, outbound investment from China has been rising sharply. In the third quarter, Chinese firms increased their overseas assets by about US$34 billion, Chinese State Administration of Foreign Exchange data showed.
Outflows so far this year reached US$143 billion, the third-highest total on record for the period. That is likely to continue and expand as more countries put tariffs on Chinese exports.
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