A measure of foreign investment in China turned negative for the first time since records began in 1998, highlighting how overseas companies are pulling money out of the country due to geopolitical tensions and higher interest rates elsewhere, reports Caixin. China’s direct investment liabilities in its balance of payments declined by $11.8 billion in the third quarter, the country’s foreign exchange administration said. The measure records monetary flows connected to foreign-owned entities in China.
Economists have said the decline in foreign investment by the balance of payments measure reflects less willingness by businesses to reinvest profits from China in the country. That’s due to strained ties with the West and the rising attractiveness of keeping cash abroad. Advanced economies have been raising interest rates while China has been cutting them to stimulate the economy.
“Probably this reflects foreign firms repatriating earnings from China, whereas previously they reinvested them,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics. “International firms, especially US ones, have been reconfiguring supply chains to use alternatives to China.”