In the second quarter of 2024, foreign investors pulled out a record USD 14.80 billion in direct investments, marking the second time such net outflows have occurred since data began in 1998. This alarming trend, highlighted by UOB Group economist Ho Woei Chen, sheds light on the weakening FDI inflows in China.
According to Chen, “China’s FDI inflows have weakened further in 2Q24, with net direct investment liabilities on the balance of payments showing a record outflow. FDI reported by MOFCOM, which only includes new FDI inflows, has also dropped to its lowest level since 3Q17.”
Despite being the largest recipient of global FDI in 2023 after the US and ASEAN, China now faces the risk of a significant slowdown in FDI inflows this year due to ongoing trade tensions and economic moderation. This shift could have far-reaching consequences, including a potential decline in job creation and economic growth over the medium to long term.
As investors, it is crucial to understand the implications of these outflows on your financial portfolio. With the uncertainty surrounding FDI in China, diversification and risk management strategies become more important than ever. Stay informed, stay vigilant, and be prepared for potential market shifts that may impact your investments.
