By BLOOMBERG

SEOUL • China’s direct investment into South Korea has dropped drastically as Beijing curbs overseas investment and restricts foreign-currency transfers to maintain its reserves, according to the South Korean government.

Direct investment from mainland China dropped 63% to US$608 million (RM2.57 billion) during the first three quarters of this year from the same period last year, according to a statement from South Korea’s Trade Ministry. Meanwhile, investment from the US fell 5.5%, while that from Japan surged 90% as Japanese companies sought more opportunities outside their home market, where they face an ageing and declining population, the ministry said.

China formally laid down new rules on overseas investments in August, making explicit its de facto campaign against “irrational” acquisitions of assets in industries ranging from real estate to hotels and entertainment.

This has seen outbound investment globally from China contract 42% to US$68.7 billion in the first eight months of this year, according to data from the Ministry of Commerce. “China’s policy may continue to restrict investment into South Korea, which needs to be monitored given the close economic ties,” said Chang Jaechul, chief economist at KB Investment & Securities Co.

Total foreign direct investment in South Korea fell 9.7% to US$13.6 billion in the first three quarters from the same period in 2016.