Foreign Investors recently are not looking much confident in China in second quarter(April-June 2024). An huge amount of 15 billion dollars have been estimated to be pulled out of Chinese market. This happened due to the worrying situation to the investors induced due to China’s recent economic slowdown. The direct investment liabilities in China’s balance payment falled to 15 billion dollars in the previous quarter. This becomes huge setback for the China as it’s only the second time when the figure has turned negative in numbers. The report was published by the State Administration of foreign Exchange. The increasing pessimism of the investors towards the chinese market is still worrying situation for them.
If the decline continues in the upcoming quarters in terms of foreign investment it would come out to be the first annual net outflow since the 90’s as reported by the Bloomberg. The foreign investement is dwindling in recents years in China as not too long 3 years back in 2021, China hit the record investment of $344 billion. As per the reports by the Ministry of Commerce in China, the first half of the 2024 recorded the lowest investment since the pandemic in 2020.
BUT WHY IS CHINA NO LONGER ATTRACTING FOREIGN INVESTORS???
There are many reasons for the decline in the investemnt in recent years. But apart from the economic slowdown another reason for the decline in investement may be the rising geopolitical tension in China. Rising geopolitical tensions are the major reason of turning foreign investors’ sentiment away from the China.
Apart from the economic slowdown and geopolitics, the sudden shift of Chinese automobile industry to electric vehicle has also turned investors’ sentiment away from the market. As earlier the money was pumped into the market to a huge opportunity by petrol/diesel vehicle manufacturers, but the shift towards electric vehicle has damped the interest of foreign car firms leading to scaling back and withdrawing back their investment.
MORE INTEREST FOR INVESTORS IN OTHER NATIONS??
Yet another conclusion which can be made behind this massive back scaling of investment fromm CHina is assumed to be better interest rates in other nations. Advanced economies which are offering higher interest rates are becoming more favorable destination for the investors. Unlike Beijing, which is lowering the interest rates to improve it’s economic slowdown as ending more money will ultimately result in the more money flowing into the market. This has given the multinationals adequate opportunity to invest in other countries rather than China. So these multinationals are motivated to pump their money where there is better returns pffered to them in the form of higher interest rates.
INCREASE IN OUTBOND INVESTMENT.
The increase in the figures of outbond investments is peaking in recent times, as it hit the highest in second quarter, with companies investing over 71 billion dollars overseas. Which is the approximate increase of over 80% as compared to the same quarter of the previous year which amounts to 39 billion dollar.
The major reasons which can be concluded for back scaling of investments:
are,
1- Economic slowdown and increased pessimism.
2-Dwindling foreign investments in recent years in China.
3-Rising geopolitical tensions.
4- HIgher interest rates in other countries.
5- Increase in outbond investments.
