Caixin
Aug 16, 2017 06:31 PM
ECONOMY

China Nonfinancial Overseas Direct Investment Drops in First Seven Months

China's Ministry of Commerce said Tuesday that extravagent overseas investment by Chinese firms has been contained, as it released the latest data on the country's nonfinancial outbound direct investment. Photo: Visual China
China's Ministry of Commerce said Tuesday that extravagent overseas investment by Chinese firms has been contained, as it released the latest data on the country's nonfinancial outbound direct investment. Photo: Visual China

(Beijing) — China’s nonfinancial outbound direct investment (ODI) plummeted 44.3% year-on-year to $57.2 billion during the first seven months of the year, as measures to regulate “irrational” overseas deals continued to be felt.

China’s Ministry of Commerce released the figure Tuesday, stressing that Chinese firms’ extravagant overseas investment had been further contained.

At the end of last year, Chinese authorities began reining in Chinese firms’ overseas shopping sprees in a bid to tackle accelerating capital outflows and to ease pressure on a weakening yuan.

The ministry and the State Administration of Foreign Exchange (SAFE) said in December they would keep a close watch on overseas acquisitions and investments in several sectors, including real estate, hotels, cinema chains and sports, which they called “irrational” because they are not related to the firms’ core businesses.

China’s ODI surged 44.1% year-on-year to $170.11 billion in 2016, the highest since 2008. Foreign reserves fell nearly $320 billion to $3.011 trillion in 2016 after a record drop of $513 billion in 2015.

The Commerce Ministry said that the structure for making ODI improved this year, with investment in real estate — which accounted for 2.0% of total nonfinancial ODI — falling 81.2%. ODI for the culture, sports and entertainment sectors — which accounted for 1.0% of total nonfinancial ODI — fell 79.1%.

By contrast, combined investment in the following sectors accounted for 70% of nonfinancial ODI: leasing and business services, such as car rentals; manufacturing; wholesale and retail trades; and software and information technology-based services.

From January through July, Chinese firms continued to invest heavily in countries along the “Belt and Road” initiative. New nonfinancial ODI into 50 countries involved in the initiative amounted to $7.65 billion, accounting for 13.4% of the total ODI, 5.7 percentage points higher than the same period last year.

Nonfinancial foreign direct investment (FDI) — referring to investment by foreign firms into the Chinese mainland — fell 1.2% year-on-year in the January-through-July period to 485.4 billion yuan ($72.6 billion), an increase from the decline of 0.1% in the first six months of this year, Commerce Ministry data showed.

By contrast, foreign investment continued to grow in high-end manufacturing, such as computer and office equipment, and pharmaceuticals, and in knowledge-intensive services, such as research and development and design. These trends were generally seen as positive signs for China’s economic transition and industrial upgrading.

High-end manufacturing and knowledge-intensive services attracted a combined 107.7 billion yuan, accounting for 22% of total nonfinancial FDI.

Contact reporter Pan Che (chepan@caixin.com)

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