A measure of foreign investment into China turned negative for the first time since records began in 1998, highlighting how foreign companies are pulling money out of the country due to geopolitical tensions and higher interest rates elsewhere.
China’s direct investment liabilities in its balance of payments declined by $11.8 billion in the third quarter, the country’s foreign exchange administration said. The measure records monetary flows connected to foreign-owned entities in China.
Economists have said the decline in FDI by the balance of payments measure reflects less willingness by foreign companies to re-invest profits made in China in the country. That’s due to strained ties with the West and the rising attractiveness of keeping cash overseas. Advanced economies have been raising interest rates while China has been cutting them to stimulate the economy.
The data could mean “there are more divestments than new investments,” said Michelle Lam, Greater China economist at Societe Generale SA. “That’s quite concerning. I think it’s just continued diversification of supply chains. Confidence will take time to recover following the more supportive measures.”
