ODI drops, but improvement expected
October 24, 2017 Category Foreign investment, Weekly
China’s non-financial outbound direct investment (ODI) dropped 41.9% year-on-year in the first three quarters. Chinese companies invested USD78 billion in 5,159 enterprises from 154 countries and regions during the January-September period, according to the Ministry of Commerce (MOFCOM). The investment was mainly channeled into leasing and commercial services, manufacturing, wholesale and retail, and the information technology sector. Outbound investment to countries involved in the Belt and Road Initiative stood at USD9.6 billion during the nine-month period, accounting for 12.3% of total ODI, up 4 percentage points from the same period in 2016. No new projects were reported in property, sports and entertainment, where the government has been seeking to limit investment.
China’s ODI has seen rapid growth in recent years. However, noting an “irrational tendency” in outbound investment, since last year Chinese authorities have set stricter rules and advised companies to make investment decisions more carefully. In August the Chinese government said that overseas investment in areas including real estate, hotels, cinemas, and entertainment would be limited, while investments in sectors such as gambling would be banned. Investment conducive to the country’s industrial upgrading would still be encouraged, the Shanghai Daily reports.
But a new rise in ODI is expected. China’s capital outflow finally stopped in September after a 22-month flight. The People’s Bank of China (PBOC) bought a net CNY850 million of foreign exchange in September, marking the first net increase since October 2015. In over-the-counter foreign exchange transactions between banks and their clients, companies and individuals sold more to banks in China than they bought from the banks last month, according the State Administration of Foreign Exchange (SAFE).
President Xi Jinping included the goal of building world-class enterprises in his keynote speech to the 19th Communist Party Congress, and Xiao Yaqing, Director of the State-owned Assets Supervision and Administration Commission (SASAC) said state-owned enterprises (SOEs) must have a leading role in investments abroad. SASAC oversees 98 central government-owned enterprises with a total CNY54 trillion in assets. Xiao highlighted the prospect of cooperation with private and foreign companies in tapping international markets, the South China Morning Post reports.
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