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Foreign direct investment grows in China in 2023 at the lowest rate in 30 years

2024-02-19T18:51:31.246Z

Highlights: Foreign direct investment grows in China in 2023 at the lowest rate in 30 years. Low national and international demand, risks of deflation and insufficient stimuli, together with a real estate crisis that has not bottomed out and a lack of confidence within the private sector are some of the main causes. Faced with this situation and the drop in foreign investment, the Chinese authorities have recently renewed their promise of greater opening. Follow all the information on Economy and Business on Facebook and X, or in our weekly newsletter.


The risks of deflation and the real estate crisis weigh on confidence in the country's economy


Direct investment from foreign businesses in China increased in 2023 by about $33 billion in net terms, according to statistics provided by the State Administration of Foreign Exchange (SAFE).

This is the lowest figure in the last 30 years.

This institution disclosed this Sunday the direct investment liabilities in its balance of payments - an indicator that follows new foreign investment in the country, recording monetary flows connected to foreign entities in China - which, according to

Bloomberg

, fell 82% in terms year-on-year and were at their lowest level since 1993.

Data published in January by the Ministry of Commerce, which does not include reinvested profits and is less volatile than the SAFE figures, pointed to an 8% year-on-year drop in new foreign direct investment in China to its lowest in recent years. three years.

SAFE figures may also reflect changing trends in foreign companies' profit figures or the size of their business in China;

According to data from the National Statistics Office (ONE), the profits of foreign industrial firms fell 6.7% year-on-year in 2023.

Investment, according to SAFE data, fell in the third quarter for the first time since 1998 and, although it experienced a slight recovery to resume growth in the final quarter of the year, the 17.5 billion dollars recorded in that period were a third less than a year ago.

This medium assures that foreign companies are taking their money out of the country in the face of growing geopolitical tensions and higher interest rates in other countries that have been raising them to combat inflation while China lowered them - less, yes, than expected by analysts - to try to stimulate economic recovery after the

zero covid

policy .

Among the recently published figures in this regard, the investment of German companies in China stands out, on the positive side, which reached almost 12 billion euros last year, the highest figure in the historical series, according to a study by the German Economic Institute. .

Low national and international demand, risks of deflation and insufficient stimuli, together with a real estate crisis that has not bottomed out and a lack of confidence within the private sector are some of the main causes that analysts put forward to explain the situation in the second largest world economy.

Faced with this situation and the drop in foreign investment, the Chinese authorities have recently renewed their promise of greater opening.

“We will continue to expand our institutional openness, trimming the negative list - of restricted sectors - for foreign investment and fostering a more market-oriented and rules-based business environment that lives up to international standards for European companies and all. the world,” Foreign Minister Wang Yi promised this weekend during a speech at the Munich Security Conference

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Source: elparis

All business articles on 2024-02-19

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