Beijing
China is facing economic challenges as it records its first quarterly deficit in foreign direct investment (FDI) and grapples with declining property prices in over two-thirds of its major cities. The State Administration of Foreign Exchange (SAFE) reported a deficit of $11.8 billion in direct investment liabilities for the July-September quarter, the first since SAFE began quarterly data compilation in 1998. Foreign investors, acting as “net sellers,” repatriated over $100 billion in funds in the first three quarters of 2023, according to a report by the Peterson Institute for International Economics.
The real estate sector is witnessing staggering losses and a consistent dip in property prices in China’s top 70 cities, with new home prices falling for the fourth consecutive month in October. Fifty-six out of 70 cities saw a decline in new home prices, and 67 experienced a drop in existing property prices, highlighting ongoing challenges for a sector that was once a significant contributor to China’s economic growth.
The manufacturing sector is also facing difficulties, with the Purchasing Managers’ Index (PMI) indicating contraction for the month of November, decreasing from 49.5 in October to 49.4. The PMI has been below 50 for seven months out of the 11-month period between January and November 2023.
Amidst the economic challenges, the US and Western powers’ efforts to “de-risk” from Beijing and the escalating trade war contribute additional pressure to China’s economy. The shift in policy focus from achieving unparalleled growth to managing economic crises aims to maintain a stable GDP growth rate of “4-5 percent” in the foreseeable future. The emphasis is on mitigating and managing the economy, recognizing a slowed growth rate.
