Chinese economy: Foreign businesses withdraw money as growth slows
Foreign companies withdrew more money from China last quarter, a sign that some investors remain pessimistic even as Beijing rolls out stimulus measures aimed at stabilizing growth.
According to data from the State Administration of Foreign Exchange released late Friday, China’s direct investment debt in the balance of payments fell by $8.1 billion in the third quarter. Foreign receipts into China decreased by nearly 13 billion USD in the first 9 months of the year.
Foreign investment in China has slumped over the past three years after hitting a record in 2021, a consequence of geopolitical tensions, pessimism about the world’s second-largest economy and strong competition. than from domestic Chinese companies in industries such as autos. If the decline continues for the rest of the year, this would be the first annual net FDI outflow since at least 1990, when comparison data begin.
Companies that have pulled back from some operations in China this year include automakers Nissan Automobile companies and Volkswagen AG, along with other companies such as Konica Minolta Inc. Nippon Steel Corp. said in July that it would exit a joint venture in China, while International Business Machines Corp. is closing a hardware research group in this country. decision affecting approximately 1,000 employees.
The prospect of an expanding trade war and deteriorating relations with Beijing during US President-elect Donald Trump’s second term could further weigh on investment activity. According to the group’s president, Allan Gabor, “geopolitical tensions” are the top concern of members of the American Chamber of Commerce in Shanghai.
“It’s difficult to plan large 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 Expo. Chinese international import. “It’s a much more surgical investment environment.”
However, the government’s efforts in late September to stimulate the economy have benefited a group of foreign investors, with the value of shares held by foreigners rising more than 26% over the past year. with August, according to separate data from the central bank. China’s benchmark stock index rose nearly 21% in September after the start of a coordinated stimulus effort, although it has since given up some of those gains.
In contrast, overseas investment from China increased sharply. According to preliminary data from SAFE, in the third quarter, Chinese companies increased their overseas assets by about 34 billion USD. That brought year-to-date capital outflows to $143 billion, the third-highest total on record for the period.
Chinese companies such as BYD Co. has rapidly increased its overseas presence to secure raw materials and build production capacity in foreign markets. That trend is likely to continue and expand as more and more countries impose tariffs on certain Chinese exports such as steel and the US threatens to impose punitive tariffs on all Chinese goods.
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