China H1 outbound investment plummets as capital outflow controls bite

[BEIJING] China's non-financial outbound direct investment (ODI) nearly halved in the first half of 2017 as curbs over capital outflows took effect, the commerce ministry said on Thursday.

Outbound direct investment in the January to June period plummeted 45.8 per cent from a year earlier to US$48.19 billion.

Rapid falls in the yuan currency prompted Beijing to tighten control over funds moving out of China since late last year, as it moved swiftly to quash expectations of a further steep depreciation and safeguard its reserves.

Capital outflows have eased in recent months in the face of tighter regulations and the dollar's rally paused. The yuan has gained more than 2 per cent this year.

"Unreasonable outbound investment have been effectively curbed," the ministry said during a regular briefing in Beijing, noting that overseas investment in real estate, hotels, cinemas and entertainment have all dropped significantly.

For example, investment into overseas real estate fell 82.1 per cent from a year earlier in the first six months of the year, accounting for just 2 per cent of the total outbound investment during the period, data from the ministry showed.

In June alone, China's total outbound investment dropped 11.3 per cent from a year earlier to US$13.6 billion.

China burned through nearly US$320 billion of reserves last year but the yuan still fell about 6.5 per cent against the dollar, its biggest annual drop since 1994.

The ministry also cited a recovery in the domestic economy and rising instability in the global trade environment as reasons for the sharp decline of China's investment abroad. "Some countries have tightened market access for foreign capital," it said, without naming the specific controls.

Foreign direct investment (FDI) into China fell 0.1 per cent to 441.54 billion yuan (S$89.6 billion) during the Jan-June period from the same period a year earlier, the Commerce Ministry said.

In June alone, FDI rose 2.3 per cent from a year earlier to 100.45 billion yuan.

REUTERS