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Amid Clampdown, China Companies Continue to Invest Less Abroad

By Fran Wang

(Beijing) — Overseas direct investment by Chinese companies in nonfinancial sectors plunged 30.1% in March from a year ago, the Ministry of Commerce said Tuesday, following a clampdown to reduce capital outflows.

Chinese investors spent a total $7.11 billion acquiring overseas assets in nonfinancial sectors last month, the Commerce Ministry said in a statement.

In the first quarter of the year, such overseas direct investment (ODI) slumped 48.8% year-on-year to $20.54 billion, according to the statement.

China’s ODI in nonfinancial sections has now fallen four consecutive months, coinciding with a move by the government to tighten restrictions on Chinese firms’ overseas buying sprees as part of Beijing’s fight against capital flight.

The government decided to impose strict controls over foreign acquisitions worth more than $10 billion, overseas real estate deals by state-owned enterprises valued at $1 billion or more, and investment of more than $1 billion in overseas projects that are unrelated to a Chinese investor’s core businesses, The Wall Street Journal reported in late November, citing documents it reviewed and unnamed sources familiar with the matter.

On Dec. 6, four government agencies, including the State Administration of Foreign Exchange (SAFE), indicated they would strengthen measures to “prevent risks from overseas investments.” They warned of “irrational outbound investment trends” in some sectors, including property, hotels, cinemas, entertainment and sports clubs, which are not seen as helping China’s industrial upgrade and technology innovation.

The nonfinancial sector ODI dropped 39.4% year-on-year in December to $8.41 billion, following a surge of 55.3% to $161.7 billion in the first 11 months of 2016, the Commerce Ministry data showed.

In keeping with the government’s desire to encourage some sectors, more than 60% of ODI in the January-through-March period was invested in the manufacturing, business services, telecommunications, and software and information technology industries, according to the ministry’s Tuesday statement.

Contact reporter Fran Wang (fangwang@caixin.com)

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