19 May 2019
Capital flight appears to be slowing amid tighter regulatory controls. Photo: Reuters
Capital flight appears to be slowing amid tighter regulatory controls. Photo: Reuters

China overseas investment, property purchases slump

China’s non-financial outbound direct investment (ODI) slumped in January while its offshore property purchases plunged after authorities tightened restrictions on capital outflows to support the ailing yuan currency and ease pressure on the country’s foreign exchange reserves.

China’s non-financial ODI slid 35.7 percent in January to 53.27 billion yuan (US$7.77 billion), the weakest in 16 months, compared with the same period a year earlier, Reuters reports, citing data from the Ministry of Commerce released on Thursday.

Chinese investment in offshore property, which has helped fuel sharp and often contentious home price rises from Vancouver to London, fell by an even sharper 84.3 percent, the news agency said.

Data earlier this month showed China’s foreign exchange reserves fell below the closely watched US$3 trillion level in January for the first time in nearly six years.

But the drop was less than expected, suggesting tighter regulatory controls are making some progress in slowing capital flight.

Following China’s moves to close loopholes on money leaving the country and step up checks on the types of overseas investment, ODI in December fell to US$8.41 billion, down 39.4 percent on-year and the lowest monthly tally for 2016.

“Risk warnings from regulators and short-term controls have achieved results. Based on their own situation, domestic firms have been more orderly and rational in undertaking overseas direct investment,” China’s State Administration of Foreign Exchange (SAFE) said in a statement to Reuters last week.

Regulators have warned they will pay close attention to “irrational” overseas investment in property, entertainment, sports and other sectors.

Outbound investment rose to US$170.1 billion in 2016, up 44.1 percent from 2015, and a commerce industry spokesman said in December that it was likely to increase again this year.

Foreign direct investment (FDI) into China also fell in January, dropping 9.2 percent on-year to 80.1 billion yuan (US$11.68 billion), the commerce ministry said.

Ministry spokesman Sun Jiwen said the decline in FDI was mainly due to a high base last year and the long Lunar New Year holiday falling earlier this year.

Last year, FDI into China increased 4.1 percent to 813.22 billion yuan, while December FDI rose 5.7 percent to 81.42 billion yuan.

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