(Bloomberg) — Foreign investors pulled a record sum of money from China last quarter, likely reflecting deep pessimism concerning the world’s second-largest economy.
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China’s direct investment liabilities in its balance of payments dropped almost $15 billion within the April-June period, marking only the second time this figure has turned negative, in line with data from the State Administration of Foreign Exchange released Friday. It was down about $5 billion for the primary six months.
Should the decline proceed for the remaining of the 12 months, it could be the primary annual net outflow since not less than 1990, when comparable data begins.
Foreign investment into China has slumped in recent times after hitting a record $344 billion in 2021. The slowdown within the economy and rising geopolitical tensions has led some firms to cut back their exposure, and the rapid shift to electric vehicles in China also caught foreign automobile firms off guard, prompting some to withdraw or reduce their investments.
The autumn comes despite Beijing’s growing efforts to draw and retain foreign investment, following the smallest increase on record last 12 months. The federal government wants to indicate it stays open and attractive to foreign businesses, within the hope that firms will bring advanced technologies and resist pressure from the US and elsewhere to decouple from China.
SAFE’s data, which tracks net flows, can reflect trends in foreign company profits, in addition to changes in the scale of their operations in China. Multinationals have more reason to maintain money abroad moderately than in China, as advanced economies have been raising rates of interest while Beijing is lowering them to stimulate the economy.
Earlier figures from the Ministry of Commerce showed that latest foreign direct investment into China through the first half of the 12 months was the bottom because the start of the pandemic in 2020.
Rising Outbound Investment
Chinese outbound investment also hit a record, with firms sending $71 billion overseas within the second quarter, up greater than 80% from the $39 billion in the identical period last 12 months.
Chinese firms have been rapidly stepping up investment, with money going into projects reminiscent of electric vehicle and battery factories.
The info also showed that the anomaly within the measurement of China’s trade surplus proceed to grow, hitting a record $87 billion within the second quarter and taking it to almost $150 billion for the primary half of the 12 months. That gap was highlighted by the US Treasury earlier this 12 months in a report that called on China to make clear why the numbers were so different.
In line with a recent report from the International Monetary Fund, this discrepancy “appears to be mainly brought on by the several methodologies used to record exports and imports of products.”
The gap has grown after a switch two years ago in what data the Chinese authorities were using, and was also boosted by a recent increase in production in bonded zones by foreign firms.
(Updates with details on Chinese investment, trade balance)
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