Money never sleeps but now it is leaving China

Foreign investment has dried up in China as the world’s second-largest economy suffers a crisis of confidence.

Last week, official data showed that multinational companies pulled nearly US$15 billion out of the country in the second quarter of 2024. 

It was only the second time that China had posted negative numbers, according to data released by the State Administration of Foreign Exchange or SAFE.

“Should the decline continue for the rest of the year, it would be the first annual net outflow since at least 1990 when comparable data begins,” Bloomberg News reported.

Cash and carry:

• The SAFE figures showed that foreign investment was also down about $5 billion for the first six months of the year.
• To put that into perspective, 2021 was a record year for China when foreign investment hit $344 billion. 

There’s an inability to ignore supply chain risks and political risks.

Paul Orlando at the University of Southern California School of Business

Delve deeper: Geopolitical risks, a real estate collapse, stagnating wages, and dwindling consumer demand have spooked overseas investors.

Between the lines: “There’s an inability to ignore supply chain risks and political risks,” Paul Orlando at the University of Southern California School of Business, told Voice of America.

Big picture: “More people [now] see China as a place where they would never get a fair shot at success or a place that was even actively working against them,” Orlando pointed out.

China Factor comment: Foreign firms are also fearful of being dragged into the China tariff wars that are being waged by the United States and the European Union.