Foreign direct investment grew in China at the slowest pace in 30 years, according to indicator

The investment direct from foreign businesses in China increased in 2023 by about US$33 billion in net terms according to a measurement offered by the State Administration of Foreign Exchange (SAFE), the lowest figure in the last 30 years, according to the economic press.

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 China’s Ministry of Commerce that do not include reinvested profits and are less volatile than SAFE figures, sAccording to economists, they pointed to a drop of 8% year-on-year in new foreign direct investment in China to its lowest level in the last 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.

Bloomberg points out that 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 US$ 17.5 billion registered in that period was 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 the economic recovery after ‘zero covid’.

Among the recently published figures in this regard, the positive aspect is the investment by German companies in China, 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 (Germany).