China saw USD 17.5 billion in foreign direct investment (FDI) coming into the country in the fourth quarter of 2023, more than reversing an outflow of USD 11.8 billion – the first ever – in the third quarter. The outflows were a function of factors such as a drop in excess returns on FDI, rising risk aversion, and negative market sentiment on China.
We believe the inflow is an initial sign that investors are returning to China.
In a campaign to revive foreign confidence, Beijing has waived visa requirements for visitors from selected countries in Asia and Europe from February.
It recently abolished market access restrictions on foreign investment in manufacturing after lifting restrictions on foreign capital going into the financial sector. Foreign investors can now take full ownership of Chinese banks, insurance companies, brokers, and fund managers, and enjoy the same treatment as domestic investors.
Other recent confidence-boosting announcements have included relaxing restrictions on investment in the debt-laden property market, boosting the development of artificial intelligence, encouraging the large-scale renewal of equipment, and upgrading the technology, transportation, construction, and healthcare sectors.
Beijing appears to have begun ‘confronting the China bear’.
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