Fall not a major cause for concern: analysts
Chinese financial institutions saw a substantial decline in the amount of inbound foreign direct investment (FDI) from foreign investors in the last quarter of 2015, with net inbound FDI dropping more than 1,300 percent from the previous quarter, official data showed on Monday.
The sharp decline might have been caused by shrinking confidence among foreign investors in the Chinese economy, but FDI into financial institutions makes up only a small portion of overall FDI into China, so there is no need to overact to the drop, analysts noted.
In dollar terms, FDI into Chinese financial institutions came to a total of $1.81 billion in the fourth quarter of 2015, according to data released Monday by the State Administration of Foreign Exchange (SAFE), down from about $3.34 billion in the previous quarter.
But at the same time, foreign investors reduced or withdrew FDI worth more than $1.64 billion from Chinese financial institutions in the fourth quarter, up by more than 74.65 percent from the previous quarter's $939 million, according to the SAFE data.
After deducting the reductions and withdrawals, Chinese financial institutions received a net inbound FDI of about $168 million in the last quarter of 2015, declining by more than 1,300 percent from the previous quarter's nearly $2.41 billion, according to the SAFE data.
The decline in net inbound FDI in the fourth quarter of 2015 was substantial compared to the same quarter in the previous year, when net inbound FDI reached more than $2.4 billion.
Drop in confidence
"The decline in net inflows of FDI may be because overseas institutions were more cautious toward China's financial industry in the fourth quarter," said Xi Junyang, a professor at the Shanghai University of Finance and Economics.
The slowdown in the Chinese economy might have caused concerns among foreign investors, but the impact will probably not be that significant, Xi told the Global Times on Monday.
Though the decline in FDI was sharp, there is no need to overact to the numbers, noted Zhou Yu, director of the Research Center for International Finance at the Shanghai Academy of Social Sciences.
"The decline may be a result of shrinking confidence amid China's economic slowdown, but the amount of the fall is actually not very big," Zhou told the Global Times on Monday.
In addition, the amount of FDI into financial institutions is relatively small compared with FDI into the non-financial sector, according to Zhou.
Meanwhile, in contrast to the dramatic decline in inbound FDI, there was a sharp increase in FDI made by Chinese investors in overseas markets.
Outbound FDI by Chinese financial institutions in the fourth quarter reached $8.24 billion, up from the previous quarter's $3.34 billion, with net outbound FDI reaching nearly $6.79 billion, up from $1.17 billion in the previous quarter, according to SAFE.
In the whole of 2015, Chinese financial institutions received a total FDI inflow of $11.15 billion, compared to a total FDI outflow of $21.51 billion, the data showed.
However, the big increase in net FDI outflows "had little to do with the slowdown in the country's economy," Xi noted.
"As Chinese companies are investing globally, so are domestic financial institutions. Various banks are setting up branches in other countries and regions these days," Xi said.
