Gov't steps, external factors prompted drop
Outbound foreign direct investment (FDI) from China saw a significant decline in December, mainly due to the government's crackdown on illegal and speculative investments overseas and intensified scrutiny over merger and acquisition (M&A) deals, experts said on Monday.
In December, outbound FDI from China dropped by 39.4 percent year-on-year to 55.86 billion yuan ($84.1 billion), according to latest data released by the Ministry of Commerce (MOFCOM).
The decline was in stark contrast to a year-on-year increase of 76.5 percent in outbound FDI in November.
December's drop also brought down the full-year growth rate for outbound FDI to 44.1 percent, compared with 55.3 percent growth in the first 11 months of 2016.
"The government's efforts to guide domestic firms in terms of investing in overseas markets to minimize risks and crack down on speculative investments might have worked," Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Monday.
Chinese regulators have repeatedly reiterated their support of healthy and orderly investment in overseas markets, but they have also increased "relevant guidance" on such deals and stricter verification procedures for individual foreign exchange purchases, according to Bai.
He pointed out that increased obstacles posed by foreign governments for M&A deals involve Chinese investments also contributed to the drop in outbound FDI at the end of last year, as planned major deals in the US, Germany and Australia that worth billions of dollars were canceled or postponed due to protectionist policy taken by some foreign governments.
Chen Shi, head of international research at Industrial and Commercial Bank of China, said turbulence in the yuan's exchange rate against the US dollar in December might have also had an impact on outbound FDI.
"With fluctuations in the yuan's exchange rate in December, the attitude of global investors, including those from China, assumed more of a wait-and-see stance in the month," Chen told the Global Times on Monday.
Despite the drop in December, overall outbound investment in 2016 was "healthy and orderly," with more Chinese investment in countries and regions along "One Belt, One Road initiative" in sectors such as manufacturing and information technology, an unidentified official at the MOFCOM said in an article posted on the ministry's website on Monday.
Chinese companies invested $14.53 billion in "One Belt, One Road initiative" markets - $31.06 billion in manufacturing and a total of $25.31 billion in information technology, software and other scientific research and technology services, said the article.
Chen forecast these trends will continue this year, as the yuan will stabilize after a period of fluctuation and China's opening-up pace will further pick up under the country's "go global" strategy.
