In the third quarter, foreign investment in China turned negative for the first time in the country's history.
According to Axios, this is important because the outflow of foreign direct investment (FDI) reflects a sharp deterioration in China's economic prospects.
“The world’s second-largest economy continues to struggle with a sluggish recovery from Covid, deteriorating consumer and business confidence, and ongoing trends of disaggregation and deglobalization,” the newspaper writes.
A broad FDI measure released Friday by China's State Administration of Foreign Exchange showed outflows of $11.8 billion in the third quarter, the first negative reading since data collection began in 1998.
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“Some of the weakness in Chinese foreign direct investment may be due to the repatriation of profits by multinational companies,” Goldman Sachs analysts write.
As Axios notes, the capital outflow reflects the collapse of companies' trust in China's state-run economic model under President Xi Jinping.
— Xi has shifted the ruling Communist Party's focus to returning China to the top of the global economy, rather than significantly improving the living standards of the Chinese.
Bottom line, this still does not mean that the Chinese economy is doomed, since it does not need foreign investment as much as it once did.
At the same time, the outflow of foreign investment indicates how quickly expectations regarding the growth of the Chinese economy have changed, Axios concludes.
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