(8 November 2023 – China) Foreign direct investment (FDI) into China dipped into negative territory for the first time on record in Q3 according to the State Administration of Foreign Exchange (SAFE).
A broad measure of FDI published by China's SAFE agency revealed an outflow of US$11.8 billion in the third quarter (Q3 2023), the first negative recording since the agency began publishing the data in 1998 and down sharply year-on-year from China’s direct investment liabilities of US$14.1 billion in Q3 2022.
The outflow of FDI is a reflection of the significant weakness in China's economic growth and trade projections. The second-largest economy on earth behind the United States remains constrained by a disappointing pandemic recovery, sagging consumer and business confidence and accelerating anti-globalisation shift. These factors have combined to close the economy off from international capital inflows while also failing to stem capital outflows.
Rising geopolitical tensions have been blamed for the negative move as foreign corporates and investors grow increasingly concerned about risks of conducting business in China such as raids and detention threats.
“These capital outflows reflect collapsing corporate confidence in China's state-led economic model under the leadership of President Xi Jinping. Xi has shifted the focus of the ruling Communist Party toward restoring China to the top ranks of global power, rather than delivering meaningful improvements to Chinese standards of living” stated Axios Markets Correspondent, Matt Phillips
“This doesn't mean China's economy is doomed. It doesn't need FDI the way it once did. But the outflow of foreign investment reflects just how quickly expectations about Chinese growth have shifted.”