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Have been hearing these kind of "capital flight" stories for decade plus now somehow big financial institutions keep pushing more FDI into China. See i'm not a

Have been hearing these kind of "capital flight" stories for decade plus now somehow big financial institutions keep pushing more FDI into China. See i'm not an economist but you can't that sounds a bit counter intuitive too me. One story says China has capital flight and you have other stories talking about more and more Foreign directed investment into China.

marcus_holmes 4y ago
The article is talking about retail banking, which is different from investment into stocks and shares. It's perfectly possible to have retail banking customers living abroad removing large amounts of capital from China, while at the same time foreign investors are injecting large amounts of capital into China. Two different flows. I think the biggest impact is going to be places like Australia that benefit greatly from Chinese nationals abroad at the moment. There are lots of Chinese students and Chinese property owners in Australia. If they can't get access to their money, that's going to hurt Australia more than China.
- coffeeblack 4y ago
  Do Australians benefit? Not being able to buy houses.
  - marcus_holmes 4y ago
    Agree totally. Australian development companies (and some of them are part-owned or fully-owned by Chinese nationals) benefit from the property investment. And Aussie Universities are basically funded by Chinese students now (not that the quality has improved, just the staffing levels). But the average Aussie doesn't benefit. Imho we should do what the Asian countries do: disallow buying property in Australia from non-Aussie citizens (or at least non-residents).
rendall 4y ago
> ...and you have other stories talking about more and more Foreign directed investment into China. Source? All of my sources have it that foreign investors are shy after consistent rounds of government interference and even nationalization.
- dragonelite 4y ago
  https://www.statista.com/statistics/1016973/china-foreign-direct-investment-inflows/ https://www.statista.com/statistics/1016973/china-foreign-di...
- marianatom 4y ago
  You are correct https://www.investmentmonitor.ai/insights/chinas-fdi-decline-foreign-companies-covid-geopolitics/ https://www.investmentmonitor.ai/insights/chinas-fdi-decline... shows that FDI is falling in the last 3 years. The increase is with double counting, from Hong Kong investment being counted as FDI. China’s Foreign Investment Data Distorted by Hong Kong Flows https://www.bloomberg.com/news/articles/2022-09-05/china-round-tripping-inflates-foreign-direct-investment-data https://www.bloomberg.com/news/articles/2022-09-05/china-rou...
coffeeblack 4y ago
Rich Chinese are getting their money out of the country, because if their money is in China, they don't really own it. The CCP could take it any day and there would be nothing they could do about it. And then there is Western capital, used to rule of law and personal property. They don't see that reality as a realistic threat. So they keep pumping money into China. It will work. Until it doesn't. And then the CCP will simply take it. But somehow I suspect that it will be a "too big to fail" situation, and all those losses will be socialized in the West, i.e. the Western governments pay for the losses probably.
- deleted 4y ago
  [deleted]
- fuoqi 4y ago
  >because if their money is in China, they don't really own it The same can be said about money moved to the West, just with a different risk profile. As the Russian situation has shown, your property can be creatively taken away if your country of origin pisses off the US too much.
  - coffeeblack 4y ago
    What I said was already 10+ ago in Hurun Report about why Chinese money flees to the West. But Chinese rich should probably ask you for advice.
  - enaaem 4y ago
    And yet we don't see capital flight from western countries to Russia and China. People with skin in the game are sending their money and kids to NATO countries.
  - andsoitis 4y ago
    The Russians whose capital had been frozen have direct ties to and prop up Putin. I don’t think you’d be able to name a single case that isn’t T like that.
    - 4y ago
kasey_junk 4y ago
It may sound counterintuitive but it actually makes perfect sense. China’s tight currency controls make it so the only way to gain access to its economy (which has obviously been growing phenomenally over the last 40 years) is to do direct investment, not portfolio investment like you would with a liberal currency. Further, fdi is a small part of the economy. Something like 400 billion dollars a year if you believe the Chinese figures that are most optimistic. So there can exist at the same time, foreign capital that wants to invest in the country and domestic capital that wants out. Even if it’s just the same proportion as the economy you’d see large capital flight. The real question is what would happen if China liberalized its currency? Would that power investment more than it caused rapid flight? Who knows but every time the yuan opens a little trillions flows out of the country and the currency regime gets more conservative again. https://rhg.com/research/cutting-through-the-fog/ https://rhg.com/research/cutting-through-the-fog/
marianatom 4y ago
1.) Hong Kong money into China is counted by the Chinese government as FDI https://www.bloomberg.com/news/articles/2022-09-05/china-round-tripping-inflates-foreign-direct-investment-data https://www.bloomberg.com/news/articles/2022-09-05/china-rou... 2.) A more thorough report shows that China's inbound FDI has been plummeting https://www.investmentmonitor.ai/insights/chinas-fdi-decline-foreign-companies-covid-geopolitics/ https://www.investmentmonitor.ai/insights/chinas-fdi-decline... China is seeing falling inbound FDI in all its major sectors, with financial services down 62% between 2019-2022 and electronics down 56%. Which would align with all of the major technology companies pulling out of China in 2022-2023

marcus_holmes 4y ago

The article is talking about retail banking, which is different from investment into stocks and shares. It's perfectly possible to have retail banking customers living abroad removing large amounts of capital from China, while at the same time foreign investors are injecting large amounts of capital into China. Two different flows. I think the biggest impact is going to be places like Australia that benefit greatly from Chinese nationals abroad at the moment. There are lots of Chinese students and Chinese property owners in Australia. If they can't get access to their money, that's going to hurt Australia more than China.

coffeeblack 4y ago
Do Australians benefit? Not being able to buy houses.
- marcus_holmes 4y ago
  Agree totally. Australian development companies (and some of them are part-owned or fully-owned by Chinese nationals) benefit from the property investment. And Aussie Universities are basically funded by Chinese students now (not that the quality has improved, just the staffing levels). But the average Aussie doesn't benefit. Imho we should do what the Asian countries do: disallow buying property in Australia from non-Aussie citizens (or at least non-residents).

rendall 4y ago

> ...and you have other stories talking about more and more Foreign directed investment into China. Source? All of my sources have it that foreign investors are shy after consistent rounds of government interference and even nationalization.

dragonelite 4y ago
https://www.statista.com/statistics/1016973/china-foreign-direct-investment-inflows/ https://www.statista.com/statistics/1016973/china-foreign-di...
marianatom 4y ago
You are correct https://www.investmentmonitor.ai/insights/chinas-fdi-decline-foreign-companies-covid-geopolitics/ https://www.investmentmonitor.ai/insights/chinas-fdi-decline... shows that FDI is falling in the last 3 years. The increase is with double counting, from Hong Kong investment being counted as FDI. China’s Foreign Investment Data Distorted by Hong Kong Flows https://www.bloomberg.com/news/articles/2022-09-05/china-round-tripping-inflates-foreign-direct-investment-data https://www.bloomberg.com/news/articles/2022-09-05/china-rou...

coffeeblack 4y ago

Rich Chinese are getting their money out of the country, because if their money is in China, they don't really own it. The CCP could take it any day and there would be nothing they could do about it. And then there is Western capital, used to rule of law and personal property. They don't see that reality as a realistic threat. So they keep pumping money into China. It will work. Until it doesn't. And then the CCP will simply take it. But somehow I suspect that it will be a "too big to fail" situation, and all those losses will be socialized in the West, i.e. the Western governments pay for the losses probably.

deleted 4y ago
[deleted]
fuoqi 4y ago
>because if their money is in China, they don't really own it The same can be said about money moved to the West, just with a different risk profile. As the Russian situation has shown, your property can be creatively taken away if your country of origin pisses off the US too much.
- coffeeblack 4y ago
  What I said was already 10+ ago in Hurun Report about why Chinese money flees to the West. But Chinese rich should probably ask you for advice.
- enaaem 4y ago
  And yet we don't see capital flight from western countries to Russia and China. People with skin in the game are sending their money and kids to NATO countries.
- andsoitis 4y ago
  The Russians whose capital had been frozen have direct ties to and prop up Putin. I don’t think you’d be able to name a single case that isn’t T like that.
  - 4y ago

kasey_junk 4y ago

It may sound counterintuitive but it actually makes perfect sense. China’s tight currency controls make it so the only way to gain access to its economy (which has obviously been growing phenomenally over the last 40 years) is to do direct investment, not portfolio investment like you would with a liberal currency. Further, fdi is a small part of the economy. Something like 400 billion dollars a year if you believe the Chinese figures that are most optimistic. So there can exist at the same time, foreign capital that wants to invest in the country and domestic capital that wants out. Even if it’s just the same proportion as the economy you’d see large capital flight. The real question is what would happen if China liberalized its currency? Would that power investment more than it caused rapid flight? Who knows but every time the yuan opens a little trillions flows out of the country and the currency regime gets more conservative again. https://rhg.com/research/cutting-through-the-fog/ https://rhg.com/research/cutting-through-the-fog/

marianatom 4y ago

1.) Hong Kong money into China is counted by the Chinese government as FDI https://www.bloomberg.com/news/articles/2022-09-05/china-round-tripping-inflates-foreign-direct-investment-data https://www.bloomberg.com/news/articles/2022-09-05/china-rou... 2.) A more thorough report shows that China's inbound FDI has been plummeting https://www.investmentmonitor.ai/insights/chinas-fdi-decline-foreign-companies-covid-geopolitics/ https://www.investmentmonitor.ai/insights/chinas-fdi-decline... China is seeing falling inbound FDI in all its major sectors, with financial services down 62% between 2019-2022 and electronics down 56%. Which would align with all of the major technology companies pulling out of China in 2022-2023