China’s Q3 2023 foreign direct investment deficit and its implications

China recorded a foreign direct investment deficit for the first time in the third quarter of 2023, a milestone that drew wide attention from observers and policymakers. The deficit was evidenced by data released by the State Administration of Foreign Exchange, confirming a shift in the pattern of cross-border investment that had been a steady stream in prior years. The quarter saw inflows retreat as firms reassessed their footprints amid a changing global environment, while capital remained mobile and sensitive to policy signals from major economies. The headline outcome signals a rare turn in China’s investment landscape, with implications for domestic financing conditions and the broader trajectory of the economy as the country continues to navigate domestic reforms alongside external pressures.