Date
17 August 2017
Microsoft has decided to close its Nokia phone factories in Beijing and Dongguan and move the operations to Hanoi. Photo: AP
Microsoft has decided to close its Nokia phone factories in Beijing and Dongguan and move the operations to Hanoi. Photo: AP

Foreign capital leaving China at faster pace

China is seeing increased outflows of foreign money amid a slowing economy, raising concern about large-scale capital fight.

The situation could put severe pressure on domestic banks and impact the country’s foreign reserves, China Daily Mail reported Thursday.

The report cited Duowei News, a media outlet run by overseas Chinese.  

It highlighted a recent decision by Citizen China, which makes Japanese Citizen watches, to fold its production base in Guangzhou.

On Dec. 17, Microsoft said it was closing the mobile phone factories of Nokia in Beijing and Dongguan and moving the business to Hanoi.

A number of other foreign enterprises are expected to join the exodus this year, including Panasonic, Sharp, Daikin, and TDK, all Japanese firms.

They plan to transfer some capacity back to Japan or to other countries.

Others such as Uniqlo, Nike, Foxconn, Funai, Clarion and Samsung are setting up new factories in Southeast Asia and India while scaling down their Chinese operations.

The foreign firms are leaving as factors which attracted them to China in the first place are quickly disappearing.

These include cheap raw materials and lower land and labor costs as overheads continue to climb in the wake of decades of rapid economic development, the report said.

In addition, labor quality has been deteriorating.

Many employers complain about lack of professional skills and working ethics among young Chinese laborers born after the 1980s or 1990s, a far cry from the industrious and obedient labor force of earlier times.

The exodus of foreign enterprises may sour the domestic investment climate, triggering a massive capital flight.

According to the People’s Bank of China, capital outflow topped US$92.1 billion in the second half of 2014, with Citibank estimating the amount at US$250 billion to US$270 billion in the fourth quarter alone.

The outflow has strained credit supply at domestic banks, prompting the People’s Bank of China to cut interest rates and deposit reserve requirements in a bid to inject liquidity into the banking system.

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CG/RA

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