China’s September FDI figure rises as foreign investor shrug aside concerns of trade war

Foreign direct investments rose by 8 per cent in China in September, as investors shrugged aside concerns of the country’s ongoing trade war with the US and put more money into local businesses and projects.

Investments rose to 636.7 billion yuan (US$97.8 billion) in the first three quarters of this year, 2.9 per cent more than the same period in 2017, the Ministry of Commerce said. September’s net inflow was 76.27 billion yuan, compared with a 1.9 per cent increase in July, and a 14.9 per cent surge in July.

UK investors led the way with inbound capital flows, with FDI soaring by 169.8 per cent in the first nine months, followed by South Korea in second place with a 41.5 per cent increment, and American investment at 6.7 per cent, the data showed.

The data shows how foreign investors who bet on long-term growth are casting their sights beyond the current US-China trade war for growth opportunities in the world’s second-largest economy. Uncertainties in business and market environments may compel some investors to cut back on their spending, although that is unlikely to show up in this year’s FDI data, said DBS strategist Nathan Chow.

“It’s going to be a medium to long term issue,” said Chow. “Foreign companies are looking at options[on whether to continue to invest in China or elsewhere.”

To prevent foreign investors from fleeing China, the government has unveiled a number of incentives to keep them here, relaxing its 50 per cent non-Chinese ownership cap on carmakers to allow Tesla to build a wholly owned factory in Shanghai. Germany’s BASF was also allowed to build the first wholly foreign-owned chemicals complex in southern China’s Guangdong province, while BMW was given the go-ahead to buy out its local partner to turn its assembly venture in northeastern China into a BMW-controlled unit.