{"id":2787,"date":"2019-05-15T05:44:57","date_gmt":"2019-05-15T04:44:57","guid":{"rendered":"http:\/\/blogg.lnu.se\/china-research\/?p=2787"},"modified":"2020-01-20T09:00:24","modified_gmt":"2020-01-20T08:00:24","slug":"china-weakening-financial-resources-for-investments-abroad-fdi-2","status":"publish","type":"post","link":"https:\/\/blogg.lnu.se\/china-research\/?p=2787","title":{"rendered":"China \u2013 weakening financial resources for investments abroad (FDI)"},"content":{"rendered":"

Kina \u2013 s\u00e4mre finansiella f\u00f6ruts\u00e4ttningar f\u00f6r investeringar utomlands (FDI)<\/h2>\r\n

Sammanfattning \/ Summary in Swedish<\/strong><\/p>\r\n

# P\u00e5 senare tid har det utvecklats en hel del oro \u00f6ver de kinesiska direktinvesteringarna (FDI) i v\u00e5r del av v\u00e4rlden. Man befarar fr\u00e4mst ett f\u00f6r snabbt v\u00e4xande kinesiskt inflytande p\u00e5 den egna hemmamarknaden och p\u00e5 de viktigaste exportmarknaderna. FDI-statistik visar emellertid att siffrorna f\u00f6r den faktiska kinesiska FDI-utvecklingen utanf\u00f6r Kina alltj\u00e4mt ter sig klart mindre skr\u00e4ckinjagande \u00e4n vad tong\u00e5ngarna i den offentliga debatten \u00e5terspeglar.<\/p>\r\n

# Utvecklingen av den kinesiska bytesbalansen borde fram\u00f6ver \u00e4gnas mer uppm\u00e4rksamhet \u00e4n vad det p\u00e5 bred front varit fallet under det g\u00e5ngna \u00e5rtiondet. Utvecklingen av bytesbalansen spelar en avg\u00f6rande roll vad g\u00e4ller den kinesiska potentialen f\u00f6r framtida FDI-satsningar. Det aktuella l\u00e4get ser klart mindre lovande ut f\u00f6r kineserna \u00e4n vad vi vant oss vid under r\u00e4tt m\u00e5nga \u00e5r.<\/p>\r\n

—————————————————————————————————-<\/p>\r\n

The analysis of a balance of payments (bop) receives clearly less (careful) analytical focus these days than ten or twenty years ago. The reasons for this development are not easy to single out. One reason may have been that global trade tensions until Donald Trump’s takeover received decreasing attention by global (financial) markets, policymakers and papers or articles – and that bop problems indeed became less acute and\/or irritating.<\/p>\r\n

More recently, however, things started to be reversed – mainly triggered by the American president and his hostile trade position against China and to a (still) milder extent against the EU (Germany). These tensions should indeed provoke a better understanding and practical application of bop studies.<\/p>\r\n

Where does the money for Chinese outgoing FDI come from?<\/strong><\/p>\r\n

In general terms, there are only a few ways for a country to create foreign money for so-called direct investments outside China. Fresh foreign money can be made available<\/p>\r\n

– by attracting new FDI (normally the best way as the invested money usually comes to stay),<\/p>\r\n

– by borrowing money in foreign currency (but an ever increasing foreign debt hurts later on),<\/p>\r\n

– by selling stocks and bonds to abroad (risky as foreigners may decide on sudden sales),<\/p>\r\n

– by selling foreign currency from the own reserves (cannot last for a long time).<\/p>\r\n

However, one can assume that the Chinese preferably would like to return to reasonable surpluses in the current account and to persisting good inflows of FDI to China for being able to make more strategically important investments abroad. Is this a realistic objective?<\/p>\r\n

Are German (Western) concerns about Chinese FDI exaggerated?<\/strong><\/p>\r\n

In Germany and quite a number of other Western countries doubts about Chinese FDI have become more noisy. However – at least so far – such doubts are not confirmed by statistics, particularly when it comes to the number of different new FDI projects. Obviously, Chinese FDI in Germany represent mostly a limited number of larger FDI – but they are not broadly spread (se IfW, Kiel, 2019, April).<\/p>\r\n

Another issue in this context remains more or less undiscussed – China’s strongly weakening current account. Through many years, China noted remarkable surpluses – with a record at 10.1 % in 2007. In 2018, however, the current account came in close to zero (+0.4 % of GDP). This quite weak result has certainly to a high extent been caused by trade protectionism and a still lagging development of new competitive products for exports. Thus, there may be both temporary and structural components in the the nowadays more or less balanced current account.<\/p>\r\n

The outlook \u2013 less Chinese money for FDI around the world<\/strong><\/p>\r\n

China\u2019s foreign trade faces currently very tough challenges and will continue to do so in the foreseeable future. These challenges are both linked to international political developments and domestic reform achievements. In this latter respect, both exports of goods and services need to be modified and modernized, and imports substantially substituted by domestic production; all this according to textbooks for getting back on track for a stronger balance on current account and improved new resources for future FDI. As indicated above, borrowing heavily abroad for FDI in other countries is certainly only a short-term option. Creating major capital inflows to China by attracting high amounts of portfolio investments from other countries should be regarded as risky and assumes far-reaching further financial reforms and deregulations of the capital balance (the counterpart of the balance on current account).<\/p>\r\n

Altogether, all these possible attempts to achieve a rejuvenation of the current account balance need time to become successful. With current conditions, the outlook for the Chinese current account balance seems to be neutral in a sense that no return to major surpluses seems to be in the cards any time soon – but no major deficits either.<\/p>\r\n

Consequently, financial resources for future Chinese FDI in other countries seem to develop less rapidly than in the past. This means that China – if it wants to remain an active investor in other countries – needs also to reorganize its strategy for the already existing financial assets, for example by gradually reducing the big share of American bonds and t-bills in Chinese portfolios.<\/p>\r\n

Obviously, it becomes increasingly important to find the relevant statistics for these assets – and to become familiar with the interpretation of the balance of payments and its sub-balances.<\/p>\r\n\r\n\"\"\r\n\r\nHubert Fromlet<\/em><\/strong>\r\n<\/em>Affiliate Professor at the School of Business and Economics, Linnaeus University\r\nEditorial board<\/a>\r\n\r\n \r\n\r\nBack to Start Page<\/a>\r\n<\/em>","protected":false},"excerpt":{"rendered":"

Kina \u2013 s\u00e4mre finansiella f\u00f6ruts\u00e4ttningar f\u00f6r investeringar utomlands (FDI) Sammanfattning \/ Summary in Swedish # P\u00e5 senare tid har det utvecklats en hel del oro \u00f6ver de kinesiska direktinvesteringarna (FDI) i v\u00e5r del av v\u00e4rlden. Man befarar fr\u00e4mst ett f\u00f6r snabbt v\u00e4xande kinesiskt inflytande p\u00e5 den egna hemmamarknaden och p\u00e5 de viktigaste exportmarknaderna. FDI-statistik visar […]<\/p>\n","protected":false},"author":174,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13398],"tags":[],"class_list":["post-2787","post","type-post","status-publish","format-standard","hentry","category-china-2"],"acf":[],"yoast_head":"\r\nChina \u2013 weakening financial resources for investments abroad (FDI) - China Research<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/blogg.lnu.se\/china-research\/?p=2787\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"China \u2013 weakening financial resources for investments abroad (FDI) - China Research\" \/>\r\n<meta property=\"og:description\" content=\"Kina \u2013 s\u00e4mre finansiella f\u00f6ruts\u00e4ttningar f\u00f6r investeringar utomlands (FDI) Sammanfattning \/ Summary in Swedish # P\u00e5 senare tid har det utvecklats en hel del oro \u00f6ver de kinesiska direktinvesteringarna (FDI) i v\u00e5r del av v\u00e4rlden. 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