A measure of foreign investment into China fell to the lowest in nearly four years in November, underlining how geopolitical tensions and a slowing economy have combined to convince foreign companies to slow their expansion.
New actually utilised foreign capital received by the country was 53.3bn yuan ($7.5bn) last month, down 19.5% from a year earlier, according to Bloomberg calculations based on data published by the Ministry of Commerce on Thursday. That’s the worst number since February 2020, when the Covid-19 pandemic first hit.
For the first 11 months of the year, investment fell 10% on year to 1.04tn yuan, the ministry said in a statement.
The data adds to signs that foreign investors’ sentiment has weakened this year despite the nation reopening its borders after three years of harsh measures to curb Covid-19 outbreaks. Although some foreign business leaders have returned to the country, few firms are rushing to spend substantially more.
“The global macro backdrop — higher dollar interest rates, slowing growth momentum and elevated geopolitical uncertainty — is anything but conducive to cross-border investment, especially into emerging markets,” Bank of America economists led by Ouyang Miao wrote in a report before the data was released.
The numbers released on Thursday show a rosier picture than other data, which have pointed to foreign firms actually pulling money out. The difference is at least partly due to how the different data sets account for what companies do with the profits they make in China.
Data from the foreign exchange regulator showed foreign investment in the third quarter turned negative for the first time since 1998, likely reflecting less willingness by firms to re-invest profits in China, partly given the higher return abroad due to the yield gap with the US.
That data showed that net investment into China has been falling since the third quarter of last year, due to the drop in money coming into the nation and an increase in funds going out.
There are some small signs that foreign interest in the Chinese market is recovering. Global funds boosted holdings of yuan-denominated bonds by the most in four months in October as a stabilizing currency helped sentiment.