While flows of foreign investment to China have slowed sharply, a cyclical downturn of the U.S. economy and falling U.S. interest rates should help support a rebound in 2024. According to China's central bank, foreign capital inflows turned mildly negative last year, while foreign direct investment inflows stood at $180 billion. Inflows have since slowed further over the past year, and foreign direct investment inflows turned negative to the tune of $11.8 billion in the third quarter of 2023, marking the first time the measure has entered negative territory since it began being recorded in 1998. FDI inflows into China have fallen sharply over the past year against the backdrop of elevated geopolitical risk, supply chain reengineering and the country's weaker-than-expected growth outlook. But it has thus far fallen less sharply than non-FDI inflows. FDI is typically characterized by longer leads and lags, which translates to lower sensitivity to short-term...
