Foreign direct investment into China slumped by 56% in the first quarter of the year as businesses remained wary of a weakening economy and deteriorating ties between Beijing and Washington, Nikkei Asia reported.
Overseas businesses invested around $10.3 billion in China during the period, infusing funds in factory construction and other projects.
While fresh investments totalled more than capital withdrawn, net investments were still lower compared to the same period last year, Nikkei said.
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Factors driving businesses away from China include the ongoing tech and trade war between Washington and Beijing and the country’s new counter-espionage law. Experts say the largely vague law, which came into effect last year, puts overseas businesses and their staff at risk of facing penalties for regular business activities.
Business sentiment has also been hit by China’s increasing raids, fines and exit bans imposed on foreign firms and their workers.
FDI into China has, effectively, been on a downward trajectory since last year, plunging by double-digit amounts in every month since May 2023. In the July to September quarter, the country suffered its first-ever quarterly deficit in foreign direct investment.
Data released in February showed that foreign direct investment into China fell a whopping 80% to its worst level in three decades.
The Nikkei report said a prolonged decline in FDI could worsen the already struggling Chinese economy. It could also slow the pace of technological innovation and production capacity in the world’s second-largest economy, the report added.
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- Vishakha Saxena
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