Foreign investment capital continued to leave China in Q3 2024, despite Beijing’s economic stimulus measures.
According to China’s State Administration of Foreign Exchange, in the third quarter, direct investment liabilities on China’s balance of payments decreased by $8.1 billion, totaling a near $13 billion drop in the first nine months of the year.
“Direct investment liabilities” refer to the financial obligations in total FDI that the nation or enterprises must repay.
FDI inflows into China have significantly declined recently.
This marks a considerable downturn after foreign capital into China peaked in 2021. The main causes are geopolitical tensions, concerns about economic prospects, and intense competition from domestic businesses. If this trend continues through the end of the year, it will be the first time China’s net FDI turns negative since 1990.
FDI in China has dropped by nearly $13 billion this year.
Many large corporations have reduced their activities in China this year, such as Nissan Motor, Volkswagen AG, and Konica Minolta. For instance, Nippon Steel withdrew from a joint venture in July, and IBM dissolved its hardware research division, affecting around 1,000 employees.
The prospect of an expanded trade war and strained relations with Beijing under Donald Trump’s second U.S. presidential term may continue to negatively impact investment in China. According to Allan Gabor, President of the American Chamber of Commerce in Shanghai, geopolitical tensions are investors’ top concern.
“This makes planning large-scale investments difficult, though we still see members making small and medium investments,” he said at the China International Import Expo last week. “This is a highly selective investment environment.”
The PBOC’s rate cuts and other actions spurred the stock market in September.
Nevertheless, the economic stimulus measures from late September have shown some positive signs. The value of stocks held by foreign investors has increased by more than 26% since August.
The benchmark stock index also rose nearly 21% in September, though it slightly adjusted downward afterward.
Conversely, China’s overseas investments surged, reaching $34 billion in Q3, bringing total investment for the year to $143 billion—the third-highest level in history for the same period.
Although Q3 was lower than Q2’s record, it remains high.
Companies like BYD are rapidly expanding their international markets to secure raw materials and boost production capacity in foreign markets. This trend is likely to continue and expand, especially as more countries impose taxes on certain Chinese exports, such as steel, and the U.S. threatens to levy punitive tariffs on all Chinese goods.
Source: MSN