Foreign businesses’ direct investment into China last year increased by the lowest amount since the early 1990s, underscoring challenges for the nation as Beijing seeks more overseas investment to help its economy.
China’s direct investment liabilities in its balance of payments rose by US$33 billion last year, 82 percent down on 2022, according to data from the State Administration of Foreign Exchange (SAFE) released yesterday. That measure of new foreign investment into the country — which records monetary flows connected to foreign-owned entities in China — slumped to the lowest level since 1993.
The data shows the effect of the COVID-19 lockdowns and weak recovery last year. The investment fell in the third quarter of last year for the first time since 1998. Although it recovered a little and returned to growth in the final quarter, the US$17.5 billion in new money in that period was still a third lower than the same period of 2022.
Photo: Alex Plavevski, EPA-EFE
SAFE’s data, which gauges net flows, can reflect trends in foreign company profits, as well as changes in the size of their operations in China, according to economists. Profits of foreign industrial firms in China dropped 6.7 percent last year from the prior year, according to National Bureau of Statistics data.
Earlier figures from the Chinese Ministry of Commerce showed new foreign direct investment into China fell last year to the lowest level in three years. The ministry’s figures don’t include reinvested earnings of existing foreign firms and are less volatile than the SAFE figures, economists have said.
The continuing weakness highlights how foreign companies are pulling money out of the country due to geopolitical tensions and higher interest rates elsewhere.
There’s rising attractiveness to multinationals of keeping cash overseas rather than in China, because advanced economies have been raising interest rates, while Beijing has been cutting them to stimulate the economy. A recent survey of Japanese firms in China showed most of those companies cut investment or kept it flat last year, and a majority don’t have a positive outlook for this year.
The government’s efforts to get overseas companies to return after the pandemic are falling short, and more will be needed if Beijing is to succeed in its aims.
There are some bright spots. Direct investment into China by German companies reached a record of nearly €12 billion (US$13 billion) last year, according to a German Economic Institute report based on data from the Bundesbank.
That demonstrates an eagerness to expand in the world’s No. 2 economy even while the European Union steps up scrutiny of these investments because of security concerns. Investment in China as a share of Germany’s total direct investment abroad expanded to 10.3 percent last year — the highest since 2014, the report showed.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
PLANS: MSI is also planning to upgrade its service center in the Netherlands Micro-Star International Co (MSI, 微星) yesterday said it plans to set up a server assembly line at its Poland service center this year at the earliest. The computer and peripherals manufacturer expects that the new server assembly line would shorten transportation times in shipments to European countries, a company spokesperson told the Taipei Times by telephone. MSI manufactures motherboards, graphics cards, notebook computers, servers, optical storage devices and communication devices. The company operates plants in Taiwan and China, and runs a global network of service centers. The company is also considering upgrading its service center in the Netherlands into a
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
RSS