ASIATODAY.ID, JAKARTA – China’s economy is entering a new reality. Throughout 2023, the amount of foreign direct investment (FDI) into the country will fall to its lowest level since the 1990s.
Quoted from Bloomberg, Monday, February 19 2024, direct investment into China amounted to $33 billion last year. This value has decreased by minus 82% compared to the 2022 period. This number has fallen to the lowest level since 1993.
SAFE data, however, can reflect trends in foreign companies’ profits in China, as well as changes in the size of their operations in China. As investment action fell sharply, profits of foreign companies operating in China also fell 6.7% year on year. This continued weakness also shows steps by foreign companies to attract money back to their countries. Mainly due to geopolitical tensions and high interest rates in other countries.
Another factor is that multinational companies are less interested in keeping cash in China. This is because a number of western countries have raised interest rates, while Beijing has cut interest rates to increase credit flows to stimulate the economy.
A recent survey of Japanese companies in China showed that the majority of Japanese investors reduced or maintained their investments in the past year, and most of these companies have no investment plans in 2024.
Bloomberg assesses that the Chinese government’s efforts to get foreign companies to resume operations after the Covid-19 pandemic have failed, and more efforts are needed if Beijing is to achieve its goals. China can hope because there are a number of non-traditional investors who are encouraging the placement of funds in the country.
German companies, for example, a German Economic Institute report based on data from the Bundesbank put at record investments of nearly 12 billion euros ($13 billion) last year. This shows the desire to expand in the country with the second largest economy in the world. However, Germany’s actions have increased scrutiny from the European Union because they are considered to have security concerns. (ATN)
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