Chinese appliance maker Midea took over the German robotics maker Kuka for $4.8 billion in December 2016.
Chinese appliance maker Midea took over the German robotics maker Kuka for $4.8 billion in December 2016.

Net Asian FDI at Record Low

Outbound FDI flows from Asia are now virtually as large as inbound FDI flows into the continent, reversing the pattern seen since at least in 2003

Net Asian FDI at Record Low

A retrenchment in foreign investment in China, combined with the country’s rising appetite for western assets, has led to a radical reshaping of global financial flows.
Outbound foreign direct investment flows from Asia are now virtually as large as inbound foreign direct investment flows into the continent, reversing the pattern seen since at least in 2003. As recently as 2014, inbound FDI into Asia was three times larger than investment in the opposite direction, news outlets reported.
The trend has been driven by China which, since the middle of 2016, has become a net provider of outward FDI, according to data from the Swiss bank UBS.
In the year to September 2016, Chinese outbound FDI reached a record 2.19% of the country’s gross domestic product, bolstered by deals such as Qingdao Haier’s $5.4 billion acquisition of General Electric’s appliance business, and appliance maker Midea’s $4.8 billion acquisition of Kuka, a German robotmaker, in December 2016.
Despite this, the retreat in inbound FDI into China has been sharper still, sliding to just 1.58% of GDP in the year to September, down 35% in a year and a far cry from the double-digit rates seen in the previous decade.
Bhanu Baweja, head of emerging market cross-asset strategy at UBS, attributed the decline to slowing economic growth. “FDI should be weak if growth is weak. We are seeing that in China, but not aggressively in other places,” he said.
Business Sentiment Sours
Trey McArver, director of China research at TS Lombard, a London-based research house, said that foreign business sentiment towards China “has soured markedly over the past three or four years”.
“It doesn’t look quite as attractive as it used to do. Nominal growth, which is what companies care about, has fallen from 20% to 7-8% now.”
However, McArver said that some multinationals had been deterred from investing in China by a growing sense of “economic nationalism” in the world’s second-largest economy.
Joerg Wuttke, president of the European Chamber of Commerce in China, agreed that, alongside worries over a slowing of the Chinese economy and overcapacity in some sectors, restrictions placed on foreign companies were behind a 23% fall in European investment in China last year to €8 billion, even as Chinese investment in the EU leapt 77% to €35 billion.
"The Chinese invested four times more in the economy of Europe (last year) than Europeans did in the market of China,” Wuttke said, with much of the former going into sectors where European companies are unable to make equivalent investments in China.
“The Chinese can go to Europe and it’s like a buffet, they have everything to pick from. Here we are constrained to four dishes and a fruit: cars, chemicals and a few other areas,” Wuttke said.
"We are constrained into certain areas and we can’t venture out into others. We are ring fenced. We don’t see European companies leaving, (but) we see them putting money elsewhere, primarily the US or North Africa.”
Asia  and LatAm
Inbound FDI as a percentage of GDP has fallen to four-year lows in Singapore, Taiwan and Thailand, with the latter seeing investment equivalent to just 0.75% of GDP in the year to September, down from 2.41% in 2015 and 4.13% in 2014.
Inflows have also been weak into Indonesia and South Korea, but have held up better in India and the Philippines. In terms of outbound flows, Thailand has led the way, alongside China, with its companies investing a near-record 3.74% of GDP in the year to September.
In contrast, net FDI into Latin America has hit its highest levels since at least 2003, despite recent recessions in Brazil, Argentina and Venezuela.
While gross investment in the region has held up, in spite of the economic weakness, FDI by LatAm companies has slumped to 0.55% of GDP, the lowest level since 2004, with Argentine, Brazilian, Chilean and Mexican companies pulling back.
“Gross inflows have not turned down at all. Maybe that Latin America has good investments, but also that people don’t think the commodity downturn is going to last,” Baweja said.

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