China records first ever outflow of foreign direct investment

By data State Administration of Foreign Exchange of the People’s Republic of China, China’s foreign direct investment (FDI) liabilities in the balance of payments fell by $11.8 billion in the third quarter. This is the first decrease in the indicator since 1998, when similar statistics began to be kept.

The volume of direct investment commitments captures the cash flows associated with foreign companies operating in China. According to analysts surveyed Bloombergthe first-ever case of a reduction in this indicator indicates the reluctance of foreign businesses to reinvest their funds in China due to growing disagreements between China and the West and more attractive conditions for storing capital in Western countries.

“To some extent, the weakness in foreign direct investment inflows into China may be due to the repatriation of income by multinational companies,” says Reuters Goldman Sachs analysts comment. “With interest rates in China “lower over the long term” while interest rates outside China are “higher over the long term,” pressure on capital outflows is likely to continue.”

Kirill Sarkhanyants