by BLOOMBERG

BEIJING • China’s outbound direct investment (ODI) recorded the first annual slump since at least 2009, as officials tightened curbs on capital outflows and increased scrutiny on foreign acquisitions.

Non-financial overseas investments plunged 29.4% to US$120 billion (RM475.2 billion), the Commerce Ministry said in a statement yesterday. The drop came as policymakers have stepped up scrutiny of the country’s most prolific dealmakers since late 2016, including conglomerates such as HNA Group Co, in an effort to slow offshore takeovers that contributed to a surge in fund outflows and rapid depreciation in the yuan.

Trends may change this year — the yuan powered through 2017 with a 6.8% surge amid a slump in the dollar and crossborder flows became more balanced. A strong economy, which is expected to have expanded by 6.8% last year, and increased foreign inflows into the onshore bond market could also help support the exchange rate, opening a window for authorities to loosen capital curbs.

“The tighter capital controls, which was the biggest reason behind the slump in ODI, will gradually be eased as the yuan stabilises,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered plc in Hong Kong. “Policymakers will approve more overseas acquisitions and mergers with real business needs — this is necessary as the nation seeks to open up the economy and internationalise the yuan.”

Foreign direct investment (FDI) into China, meanwhile, dropped by 9.2% in December, compared to an abnormal surge of 90.7% the prior month, the ministry said. For the full year, FDI climbed 7.9% to 877.6 billion yuan (RM544.11 billion). — Bloomberg