China’s Outbound Investment Slumped in 2017 as Deals Scrutinized

  • China’s outbound direct investment recorded the first annual slump since at least 2009, as officials tightened curbs on capital outflows and increased scrutiny on foreign acquisitions.
  • Non-financial overseas investments plunged 29.4% to USD120bn. The drop came as policy makers have stepped up scrutiny of the country’s most prolific dealmakers since late 2016, including conglomerates such as HNA Group Co., in an effort to slow offshore takeovers that contributed to a surge in fund outflows and rapid depreciation in the yuan.
  • Trends may change in 2018 – the yuan powered through 2017 with a 6.8% surge amid a slump in the dollar and cross-border flows became more balanced. A strong economy, which is expected to have expanded by 6.8% in 2017, and increased foreign inflows into the onshore bond market could also help support the exchange rate, opening a window for authorities to loosen capital curbs.
  • Foreign direct investment into China, meanwhile, dropped by 9.2% in Dec 17, compared with an abnormal surge of 90.7% in Nov 17, the ministry said. For the full year, FDI climbed 7.9% to RMB877.6bn (USD136bn).

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