Reporting by Shanghai newsroom
Editing by Shri Navaratnam
Investment
China’s first deficit in foreign investment signals West’s ‘de-risking’ pressure
SHANGHAI, Nov 6 (Reuters) – China recorded its first-ever quarterly deficit in foreign direct investment (FDI), according to balance of payments data, underscoring Beijing’s challenge in wooing overseas companies in the wake of a “de-risking” move by Western governments.
Direct investment liabilities – a measure of FDI – were a deficit of $11.8 billion during the July-September period, according to preliminary data of China’s balance of payments released late on Friday.
That’s the first quarterly shortfall since China’s foreign exchange regulator began compiling the data in 1998, which could be linked to the impact of “de-risking” by Western countries from China amid growing geopolitical tensions.
“Some of the weakness in China’s inward FDI may be due to multinational companies repatriating earnings,” Goldman Sachs wrote, adding China’s interest rate differentials with developed countries also played a part.
“With interest rates in China ‘lower for longer’ while interest rates outside of China ‘higher for longer’, capital outflow pressures are likely to persist.”
As a result, China’s basic balance – which encompasses current account and direct investment balances and are more stable than volatile portfolio investments – recorded a deficit of $3.2 billion, the second quarterly shortfall on record.
“Given these unfolding dynamics, which are poised to exert pressure on the RMB, we anticipate a sustained strategic response from China’s authorities,” Tommy Xie, head of Greater China Research at OCBC wrote.
Onshore yuan trading against the dollar also hit record-low volume in October, official data showed, highlighting authorities’ stepped-up efforts to curb yuan selling.
Xie expects China’s central bank to continue counter-cyclical interventions – including a strong bias in daily yuan fixings and managing yuan liquidity in the offshore market- to support the currency in the face of these headwinds.
Latest data shows that onshore volume of yuan trading against the dollar slumped to a record low of 1.85 trillion yuan ($254.05 billion) in October, a 73% drop from the August level.
The People’s Bank of China has urged major banks to limit trading and dissuade clients to exchange the yuan for the dollar, sources have told Reuters.
In September, foreign exchange outflows from China rose sharply to $75 billion, the biggest monthly figure since 2016, Goldman Sachs data showed.
($1 = 7.2819 Chinese yuan renminbi)
Our Standards: The Thomson Reuters Trust Principles.
Economy
S&P/TSX composite down more than 200 points, U.S. stock markets also fall
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
Economy
S&P/TSX composite up more than 150 points, U.S. stock markets also higher
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
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