China’s foreign investment drops 29.4%
CHINA’S financial outbound direct investment (ODI) in 2017 fell 29.4 percent year-on-year to $120.08 billion (R1.48 trillion), the commerce ministry said yesterday, as firms backed off from speculative overseas investment amid a government crackdown.
ODI in December alone rose 49 percent year-on-year to $12.53bn, according to a calculation on official data, extending gains from a 34.9 percent annual growth in November. The positive ODI growth in the past two months is largely thanks to increased Chinese investments in manufacturing and information sectors, the ministry said, while no new Chinese investments were made in property, sports and entertainment industries. “Irrational” overseas investment has been effectively contained, added the commerce ministry.
Overseas investment by Chinese firms has fallen sharply since Beijing in late 2016 implemented strict controls on capital leaving the country. Investment in countries involved in China’s Belt and Road initiative, an extensive infrastructure plan meant to link Asia with the Middle East and Europe, totalled $14.36bn in 2017, the commerce ministry said.
Belt and Road deals accounted for 12 percent of total investments in 2017, up 3.5 percentage points from a year earlier.
Analysts expect that after the tumble in ODI in 2017, China is likely to see an increase in overseas investment deals this year.
“The yuan’s appreciation has provided some impetus for Chinese firms to do deals overseas,” said Iris Pang, Great China economist at ING. Around the second quarter, it can be expected that China is clearly having big capital inflows, “so that the State Administration of Foreign Exchange (Safe) can approve more overseas deals,” she said.
The Chinese currency has risen about 1.2 percent against the dollar this year, after a roughly 6.8 percent gain during 2017, reversing three straight years of depreciation.
Foreign direct investment into China in December fell 9.2 percent from a year earlier to 73.94bn yuan (R141.52bn), the first decline in five months.