(Bloomberg) — German companies’ direct investment into China reached a record of nearly €12 billion ($13 billion) last year, demonstrating an eagerness to expand in the world’s number two economy even while the European Union steps up scrutiny of these investments because of security concerns.
Investment in China as a share of Germany’s total direct investment abroad expanded to 10.3% last year, the highest since 2014, according to a German Economic Institute report based on data from the Bundesbank. The investment was financed by the retained profits of German-controlled enterprises in mainland China and Hong Kong, it found.
Germany in July published a China strategy that called on the country’s biggest companies to reduce their dependence on China, and for stronger policies to counter risks connected with outbound investment. The European Union has also moved to tighten oversight of FDI due to fears about the transfer of technology with military applications — drawing criticism from Beijing.
The latest investment data show there is “no trend” of diversification away from China, according to the report. Anecdotal data suggests that the rise in investment is driven by larger companies, it added.
“Especially larger German companies still see China as a large and growing market with an immense customer base,” the report’s author Jürgen Matthes said. German firms often plan to base more of their business activities in China to hedge against risks emanating from rising global trade tensions, he added.
A survey published last month by the German Chambers of Commerce in Greater China found that 73% of large companies operating in China plan to increase investment over the next two years, compared to 50% among the smallest companies.
The European Commission has been working on an outbound investment screening policy which would mirror efforts by the US to control companies’ investments into China. But pushback from member states meant the publications last month of more limited proposals than had been initially planned.
Because of US pressure for Europe to fall in line with its own controls, it’s in EU’s countries’ interests “to set up a European solution, instead of being forced to follow the US version,” said Matthes.
The German Economic Institute’s analysis is based on balance-of-payments data, and so doesn’t distinguish between greenfield investment involving the construction of new facilities China or the purchase of Chinese financial assets by German companies.
The report also showed that categories of FDI such as inter-company loans and equity injections by German companies into China have been falling.
Outbound investment in some parts of China has come under scrutiny from campaigners targeting it on ethical grounds. Volkswagen AG said this week it was reviewing activities in the western region of Xinjiang following new allegations of human-rights abuses at a project there. Chemical company BASF SE said this month it was speeding up divestment from the region over separate forced-labor allegations. China denies abuses in the region.
In a separate report published this week, the US-based Rhodium Group said Bundesbank data suggested German companies are increasingly reinvesting their made-in-China profits inside the country, to lower their costs.
As part of that trend, companies like automaker Volkswagen and BASF are reducing their footprint in the German market while increasing China-based jobs, research and development and, — in some cases — the production of goods destined for export, the report said.
“The surge in investment in China, and recent wave of downsizing in Germany, suggests that a gap is emerging between the financial interests of some German corporations, on the one hand, and the interests of their Germany-based staff and the broader German economy, on the other,” the Rhodium report added.
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.
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.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
