Foreign companies withdrew more money from China in the last quarter, a sign that some investors are still bearish even as Beijing rolls out stimulus measures to stabilize growth.
China’s direct investment liabilities in its balance of payments fell by $8.1 billion in the third quarter, according to data from the State Administration of Foreign Exchange released late Friday. The indicator, which measures foreign direct investment in China, fell by almost $13 billion in the first nine months of the year.
Foreign investment in China has plummeted over the past three years after reaching a record high in 2021. This is due to geopolitical tensions, pessimism about the world’s second-largest economy and increased competition from Chinese domestic companies in industries such as automobiles. If the decline continues for the rest of the year, it would be the first annual net outflow of foreign direct investment since at least 1990 comparable data begins.
Companies that have pulled back some operations in China this year include automakers Nissan Motor Co. and Volkswagen AG, along with others such as Konica Minolta Inc. Nippon Steel Corp. said in July it was exiting a joint venture in China, while International Business Machines Corp. a hardware research team in the country concludes, a Decision Around 1,000 employees are affected.
The prospect of an expanded trade war and worsening relations with Beijing during US President-elect Donald Trump’s second term could further weigh on investment. “Geopolitical tensions” are the biggest concern for members of the American Chamber of Commerce in Shanghai, according to the group’s chairman, Allan Gabor.
“It makes it difficult to plan large investments, but on the contrary, we see many members making small and medium-sized investments,” Gabor said in an interview with Bloomberg TV during the China International Import Expo last week. “It’s a much more surgical investment environment.”
Still, the government’s efforts to stimulate the economy in late September have already benefited a group of foreign investors, with the value of stocks held by foreigners rising more than 26% from August, according to separate central bank data. China’s benchmark stock index rose nearly 21% in September after the start of a coordinated stimulus measure, although it has since given back some of those gains.
In contrast, foreign investment from China has risen sharply. Chinese firms increased their foreign assets by about $34 billion in the third quarter, according to preliminary data from SAFE. That brings outflows to $143 billion so far this year, the third-highest total on record for that period.
Chinese companies like BYD Co. has been rapidly expanding its presence abroad to secure raw materials and build production capacity in foreign markets. This trend is likely to continue and expand as more countries impose tariffs on some Chinese exports such as steel and the US threatens to impose tariffs on all Chinese goods.
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