China outbound investment retreats as capital controls bite

BEIJING (REUTERS) - China's non-financial outbound direct investment (ODI) slid 35.7 per cent on-year, the commerce ministry said on Thursday (Feb 16), as the country's crackdown on outflows hit offshore property investment.

The ministry said in a statement overseas property investment fell 84.3 per cent in January.

The latest data on outbound investment comes as Beijing steps up efforts to stem capital flight, which adds depreciation pressure to the yuan, and threatens to further deplete China's foreign currency reserves.

ODI fell 35.7 per cent to 53.27 billion yuan (US$7.77 billion, S$11.02 billion)) in January, continuing a large decline seen in the previous month. In December, ODI was US$8.41 billion, down 39.4 per cent year-on-year and the lowest amount for 2016. This followed China's declaration that it would close loopholes and step up checks on overseas investment.

China has warned regulators that it will pay close attention to "irrational" overseas investment in property and other sectors.

The government says it supports legitimate overseas investment, and that policies to support outbound investment will not change, though some officials have expressed concern about the rapid increase in overseas investment last year.

At least three regulators in the last month have strengthened oversight of outbound investment or warned against reckless foreign investment.

Large companies like Fosun, China's largest private conglomerate, say that new restrictions will not impact their investment plans because they already have sufficient funds overseas.

Outbound investment hit US$170.1 billion in 2016, up 44.1 per cent from 2015, and a commerce industry spokesman said in December ODI was likely to increase again in 2017.

Foreign direct investment (FDI) into China fell 9.2 per cent in January to 80.1 billion yuan (US$11.68 billion), the Ministry of Commerce said on Thursday.

Commerce ministry spokesman Sun Jiwen said the decline was mainly due to a high base last year and an earlier Lunar New Year holiday.

Last year, FDI to China increased 4.1 per cent on the year to 813.22 billion yuan, while December FDI rose 5.7 per cent to 81.42 billion yuan.