Global Investors Flee China: Germany Shifts Focus to U.S. Amid Economic Concerns

On the 20th, the Chinese government’s significant reduction in the benchmark interest rate, known as the Loan Prime Rate (LPR), is believed to be influenced by the fierce “exodus from China” by global investors.

According to the Financial Times (FT) and others, the departure from China by foreign investors is more severe than ever in China, where economic slowdowns and conflict with the United States overlap. Citing its database, FDI Markets, the FT reported that Germany, China’s largest trading partner, reduced its investment in China last year and significantly increased its investment in the United States. According to statistics, German companies invested $15.7 billion in U.S. projects last year, while the total amount of investment committed in China was only $5.9 billion. U.S. investment is nearly three times that of China. Although investment in China increased by almost 40% compared to the previous year, investment in the United States almost doubled from $8.2 billion the last year. The FT reported, “The United States, by offering promises of economic growth and favorable tax benefits, is attracting German companies, which are struggling as their economic situation worsens not only in their domestic (German) market but also in China, their largest trading partner.”

The decrease in foreign investment is evident even when looking at the foreign direct investment (FDI) data surveyed by the Chinese government. On the 18th, the State Administration of Foreign Exchange of China announced that foreign direct investment in China last year was only $33 billion, a decrease of 82% from the previous year. Compared to 2021, it is one-tenth the size, and the growth rate is the lowest in 30 years since 1992. The departure of global funds from the Chinese stock market is also steep. Last month, foreign funds withdrew 14.5 billion yuan from the Chinese stock market, marking the sixth consecutive month of net outflows. Over the past year, the China CSI300 index has fallen 18% and even recorded its lowest point in five years at 3179.63 on February 2.