Foreign Investors Withdraw Record Funds from China in Q2

By Jessica Huang

Cover Image Attribute: Shanghai Skyline / Image by shanghaibowen from Pixabay

Foreign investors withdrew an unprecedented amount of money from China in the second quarter, indicating significant pessimism about the world's second-largest economy.
According to data released on August 9 by the State Administration of Foreign Exchange (SAFE, 国家外汇管理局), China's direct investment liabilities in its balance of payments fell by nearly $15 billion from April to June. This marks only the second time this figure has turned negative. The total decline for the first half of the year was about $5 billion. If this trend continues throughout 2024, it would represent the first annual net outflow since at least 1990, when comparable data became available.
Foreign investment in China has declined in recent years after reaching a record $344 billion in 2021. The economic slowdown and escalating geopolitical tensions have caused some companies to reduce their involvement, while the rapid shift to electric vehicles in China surprised foreign car manufacturers, leading some to withdraw or scale back their investments.
This decline has occurred despite Beijing's increasing efforts to attract and retain foreign investment, following the smallest increase on record in 2023.
The government aims to demonstrate that China remains open and appealing to foreign businesses, hoping that companies will bring advanced technologies and resist pressure from the United States and other countries to decouple from China.
SAFE’s data, which monitors net flows, can indicate trends in foreign companies' profitability and the scale of their operations in China. Multinational companies have more incentive to keep cash overseas rather than in China, as interest rates are rising in advanced economies while Beijing has been lowering them to boost the economy.
Earlier data from the Ministry of Commerce (中华人民共和国商务部) revealed that new foreign direct investment into China during the first half of 2024 was at its lowest since the onset of the Covid-19 pandemic in 2020.
At the same time, Chinese outbound investment reached a record high, with firms sending US$71 billion overseas in the second quarter—an increase of over 80 percent compared to the $39 billion in the same period in 2023.
Chinese companies have been rapidly accelerating investments, particularly in projects like electric vehicle and battery factories.
The data also indicated that the discrepancy in measuring China’s trade surplus continues to widen, reaching a record US$87 billion in the second quarter and totaling nearly $150 billion for the first half of 2024. This gap was pointed out by the US Treasury earlier in 2024 in a report urging China to clarify the differences in the figures.
A recent report from the International Monetary Fund attributed this discrepancy primarily to the differing methodologies used to record exports and imports of goods.
With reporting by The Straits Times

IndraStra Global is now available on
Apple News, Google News, Feedly, Flipboard, and  WhatsApp Channel

COPYRIGHT: This article is published under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. https://creativecommons.org/licenses/by-nc-nd/4.0/

REPUBLISH: Republish our articles online or in print for free if you follow these guidelines. https://www.indrastra.com/p/republish-us.html