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China’s net inflows rise in Q1, Q2 of 2017
August 15, 2017, 12:03 am

FDI may have decreased slightly but the net inflow has increased as Beijing works to reduce capital outflows [Xinhua]


In a sign that China’s economy is returning to a robust level and that confidence in the world’s biggest market is getting an uplift, Beijing officials announced this weekend that the ratio of foreign capital inflows in a wide range of sectors versus outflows has reversed the negative trends of previous years.

In the first two quarters, the net inflows hit $16 billion.

This is a remarkable turnaround when one considers that capital outflows in China reached $725 billion in 2016. Despite record Foreign Direct Investment (FDI) for that year, the net inflows were at a $416 billion deficit.

Although tens of billions of dollars have continued to flow into China since it devalued its yuan in summer 2015, the amount of outflow noticeably increased and created a net deficit.

January 2017 marked the first time that Chinese financial institutions reported an increase in net inflows in different sectors. And the trend would continue.

FDI in the technology manufacturing sector was up 11.1 per cent in the first two quarters, for example.

According to official state data, there was a 20.4 per cent increase in FDI targeting the high technology services sector.

Additionally, China’s State Administration of Foreign Exchange (SAFE), which monitors investments in the financial sectors, said that FDI to China’s financial institutions, banks and securities reached $3.4 billion Q2 of 2017, while $1.32 billion of investment flowed out.

This has resulted in $2.08 billion of net inflows.

Chinese economists credit the return of greater FDI to economic reforms instituted by the government to ease the means for foreign companies to do business in the country.

Just last month, Chinese authorities dramatically reduced the number of industries that had previously been barred to foreign investment as well as reduced the time for foreigners to register their companies.

Chinese leaders, such as Premier Li Keqiang, have reiterated their commitment to ensuring that foreign companies receive equal treatment to their local counterparts and do not sink in bureaucracy.

This is part of an economic policy to strengthen the yuan and maintain tighter control of capital outflows.

By Firas Al-Atraqchi for The BRICS Post with inputs from Agencies

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