According to data released by the Chinese Ministry of Commerce, from January to August this year, the actual use of foreign direct investment (FDI) in China decreased by 31.5% compared to the same period last year, with a 33.8% drop in US dollar terms. During the same period, the outflow of foreign capital through primary and secondary income channels reached $226.9 billion, a 73% increase from 2019.
In the first eight months of this year, FDI amounted to 580.19 billion yuan, equivalent to approximately $81.713 billion in US dollars, representing a 33.8% year-on-year decrease, according to data from the Chinese Ministry of Commerce as of September 14.
Renowned as a certified senior statistician, economist, and former adjunct professor at the Economics School of Changjiang University, the financial sector expert “Mars Macro” stated on September 24 that by deducting the accumulated data from August and July, it can be estimated that FDI in August was around $5.8 billion, a 50.4% decrease compared to the same period. This marks the largest decline in FDI in the past 25 years based on data collected by the Cow Research Institute since 2000. FDI in August has fallen below the levels observed in August 2004, which stood at $6.1 billion out of a total of $62.1 billion for that year.
While FDI is declining, foreign capital is flowing out of China, with tech companies like Apple, Samsung, and Intel among them. According to the State Administration of Foreign Exchange, funds leaving China through primary and secondary income channels totaled $226.9 billion in the first eight months of this year. “Mars Macro” predicts that the total outflow for the year will exceed $340 billion, a 73% increase from 2019.
Regarding the reasons for foreign capital leaving China, “Mars Macro” believes that political factors play a significant role, with a retreat in the openness of commodity mobility and state-owned funds showing a recent bias against private and foreign enterprises in bidding processes. Additionally, the delay in opening up the service sector has contributed to the exodus of foreign investment.
Moreover, the rapid development of state-owned enterprises has squeezed out foreign enterprises, making it difficult for them to maintain normal profitability in unfair competitive environments. In recent years, there has been excessive strengthening of regulatory trends by administrative agencies. This behavioral shift from “development first” to “safety first” or “minimizing risks first” has led to significant deviations in policy implementation, negatively impacting the autonomy and fair competition of private enterprises and foreign companies, dampening their investment enthusiasm.
Geopolitical factors also play a key role in foreign capital flight.
In response to these issues, netizen “Persistence (Jian yexing)” shared a similar view: “Before, there was a lot of freedom for economic development, with development as the core focus, but now the situation has changed. It feels like everyone’s hands are tied up. Previously, discussions were centered around development, but now it’s more about safety and security.”
“Only Love Special Education” stated: “In the past few years, with the mask operations, they directly controlled people from moving outside. In cities with over twenty million people, if they say you can’t go out, you can’t go out. People have not committed any crimes, why should they be locked up at home? Who would dare to come with these kinds of operations?”