‘Small-scale dip’? China downplays FDI inflow decline that may be having a big impact on confidence
- Ministry of Commerce’s head of foreign investment says ‘short-term fluctuations’ will not make investors less sure about China’s development
- But some foreign business chambers continue to warn of the effects of diminished confidence, and much of this still stems from ambiguity in regulations
Beijing’s all-out efforts in recent months to defy Western calls to “de-risk” while cementing China’s footings in the global supply chain appear to have been compromised by a drop in foreign direct investment during the first half of the year.
Foreign direct investment in China fell by 2.7 per cent from January to June, year on year, to 703.65 billion yuan (US$98 billion), according to fresh figures from the Ministry of Commerce, which has not yet published the number in US dollar terms.
In the first five months of 2023, the US-dollar-denominated total had fallen by 5.6 per cent from a year earlier to US$84.4 billion, including a year-on-year fall of 18.4 per cent in May.
“We believe short-term fluctuations in the numbers will not affect foreign investors’ optimism towards China’s development. The atmosphere for the further expansion of FDI to China has not changed,” said Zhu Bing, director of Mofcom’s Department of Foreign Investment Administration, when the figures were released last week.
While Zhu described the drop in FDI to China as “a small-scale dip”, this would raise further questions on how confident foreign investors remain in investing in the world’s second-largest economy in the near future, when Beijing’s post-Covid economy has yet to show a strong sign of recovery.
