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European Interest in China Investments Wanes – The New York Times

BEIJING — European corporate investment in China, a key source of Western technology and capital since China began opening up its economy four decades ago, is falling steeply and now mostly limited to a…….

BEIJING — European corporate investment in China, a key source of Western technology and capital since China began opening up its economy four decades ago, is falling steeply and now mostly limited to a handful of multinationals, three new reports show.

The slackening in investment is the latest in a series of ominous signs for the Chinese economy. The real estate market is slumping, with prices declining in many Chinese cities as the volume of transactions plummets. Consumer spending is drying up because of stringent “Covid zero” policies that have led to lockdowns in many cities. And American investment in China is also faltering because of geopolitical tensions.

China’s published statistics for foreign direct investment show that it is gradually rising overall. But the bulk of what China counts as foreign investment is money arriving from Hong Kong, which tends to be composed of mainland money that has been briefly routed through Hong Kong as a tax-minimization measure.

A new analysis by Rhodium, a New York research firm, shows that so-called greenfield investments from the European Union and Britain in new factories and other installations have plunged.

These investments fell to just under $2 billion in the first half of this year, compared with $4.8 billion in the first half of last year, according to Rhodium.

A handful of German manufacturers, like Volkswagen, account for the bulk of the few European investments still being made in China. They raise money for these investments mostly by keeping in China the profits generated by their Chinese subsidiaries instead of sending money from their home country.

“A few big firms are propping up the numbers there,” said Noah Barkin, the managing editor of Rhodium’s China practice. “Many others are reassessing their presence.”

The European Chamber of Commerce in China said in another report, issued in Beijing on Wednesday morning, that European companies had been frustrated by the difficulty of getting executives and employees from abroad into China, which has tightly limited international travel to reduce the risk of coronavirus outbreaks.

Before the pandemic, China allowed six million to seven million international arrivals per month. But in July, the latest month with data available, it was only 146,000 people — up from almost none at the same time last year but still a tiny fraction of the three million flying into Singapore this July.

China’s economy grew just 0.4 percent from a year earlier in …….

Source: https://www.nytimes.com/2022/09/20/business/europe-china-investment.html

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