China’s overseas investment fell 10 per cent last year, as government crackdown on capital flight continues

China’s outbound direct investment fell 9.6 per cent to US$143.04 billion in 2018, amid growing curbs on money leaving the country, the Ministry of Commerce has announced.

This was the second successive drop in China’s outbound direct investment (ODI) after many years of breakneck growth. In 2017, ODI dropped by 19.3 per cent, the first decline in record. Indeed, as recently as 2016, the Ministry of Commerce (MOFCOM) reported record high ODI, of US$196.15 billion.

However, despite the Belt and Road Initiative, the cornerstone of President Xi Jinping’s foreign policy, encouraging Chinese companies to “go out”, the government has put the brakes on Chinese companies hoovering up real estate, hotels, cinemas, and sports clubs around the world.

Furthermore, with China’s relations with the West, including the United States and European Union, becoming increasingly strained, analysts have noticed “greater foreign hostility toward Chinese investment”.

The statement on the Ministry of Commerce (MOFCOM)’s website pointed to the fact that despite the decline, China’s “influence in global foreign direct investment continued to expand”. China remained the world’s second largest overseas investor, second only to Japan, as global foreign direct investment dipped by 29 per cent, the statement said.

“The country’s stock of ODI reached US$1.98 trillion in 2018, ranking third after the United States and the Netherlands,” the statement said, but when looking at China’s declining ODI, international analysts have tended to focus instead on the perceived growing hostility to Chinese investment around the world.