January 17, 2018
China’s outbound direct investment dropped 29.4% last year to $120 billion, as the government tightened its grip on capital outflows and increased scrutiny on foreign acquisitions. The nation’s Commerce Ministry reported the first annual slump since at least 2009 in non-financial overseas investments.
Investment in 2017 mainly went to leasing and commercial services, manufacturing, wholesale and retail and information technology sectors.
The controls were aimed at slowing offshore acquisitions that contributed to a surge in fund outflows and rapid yuan depreciation. That policy could shift in 2018, given the strengthening yuan, which surged 6.8% in 2017, while the dollar slumped and cross-border flows achieved greater balance.
The Commerce Ministry’s Han Yong said that “irrational outbound investment has been curbed.”
A strong Chinese economy, which is expected to have expanded by 6.8% in 2017, combined with increased foreign inflows into the onshore bond market, may help support the exchange rate and result in Chinese authorities loosening capital curbs.
For comments, questions or concerns, please contact Dennis Kaiser