Beijing, 30th Nov 2023: The signs of historically weak overseas investment in China are evident, reflecting a decline in foreign direct investment (FDI) and various related factors. China’s sluggish economy and a sense of insecurity among foreigners makes Chinese Premier Xi Jinping worry about the future.
As per our sources the decline and exodus of investment and business in China is in very bad situation.
The number of students and tourists visiting China significantly decreased as well. Recently, the State Administration of Foreign Exchange reported an unprecedented deficit of $11.8 billion in direct investment liabilities, reflecting a significant decline in FDI.
Foreign firms are refraining from reinvesting their earnings, and for the first time ever, these businesses are selling their existing investments to Chinese companies and repatriating funds. Experts attribute these actions to a process known as “de-risking.”
U.S.-China tensions have heightened the cautiousness of potential investors. In response, Beijing has closed foreign consultancy and due-diligence firms, impeding risk assessment and investment decision-making for foreign companies. This crackdown involved authorities raiding multiple U.S. firms’ offices in China, such as the Mintz Group and Bain & Co., further worsening the situation.
Additionally, offshore listings of Chinese companies in U.S. markets have dramatically declined due to regulatory uncertainty and weak performances within China’s domestic market. In 2021, 34 Chinese initial public offerings in the U.S. raised $12.6 billion. Last year, that had nosedived to $468 million from 14 IPOs.
Recognizing the urgency, China unveiled a 24-point plan in August aimed at attracting foreign investment. The plan focuses on improving the business environment, particularly in key sectors like technology and biomedicine. Though China has promised to expand channels for eligible foreign investors, specific details remain scarce.
Moreover, President Xi Jinping addressed the issue at the recent APEC summit, assuring the international community of the government’s commitment to creating a more favorable investment climate. However, without significant changes, these efforts may not have an immediate impact on China’s short-term economic challenges.
The decline in overseas investment in China underscores the country’s weak economy and the sense of insecurity among foreign investors. The decrease in students and tourists visiting China further highlights the declining confidence in the country. More than 11,000 Americans studied in China in 2019. That number has fallen to a mere 350 this year, according to the U.S. Embassy in Beijing.
China has attempted to address these issues through initiatives aimed at attracting foreign investment and enhancing the business environment. However, the challenges are immense, and it will take time to restore a positive and stable environment for foreign businesses. As uncertainties surrounding U.S.-China relations persist, creating a more favorable investment climate will require long-term efforts.