Foreign capital keeps flowing into China amid COVID-19, U.S.-China trade tensions



Photo taken on April 14, 2020 shows containers at the Lianyungang Port in Lianyungang City, east China's Jiangsu Province. China's foreign trade showed signs of stabilizing in March with export and import both beating bearish market expectations, official data showed Tuesday. (Photo by Geng Yuhe/Xinhua)

As COVID-19 continues to sweep across the world and wreck economic havoc globally, foreign capital continues to flow into China, according to a report compiled by research firm Rhodium Group published Thursday.

While the COVID-19 outbreak has slammed inbound and outbound deal-making this year, flows into China have picked up every month since January. The first five months of 2020 has seen foreign MA (mergers and acquisitions) into China surpassing Chinese outbound MA activities in both volume and value terms for the first time in a decade.

"Over the past 18 months, we have recorded levels of foreign MA into China that were not seen in the previous decade," the report said.

According to Rhodium, most of the capital inflows has been driven by American and European firms taking advantage of looser foreign ownership limits or betting on Chinese consumer demand.

The activity is happening at a time when U.S.-China relations are strained.

However, the report said "foreign appetite for assets in China will remain robust."

Rhodium researchers also cautioned that reduced foreign direct investment flows will be a global reality for some time and China is no exception.

"The COVID-19 pandemic is dragging on international trade, people flows, and cross-border capital movements. UNCTAD (United Nations Conference on Trade and Development) predicts that global FDI flows could drop up to 40 percent in 2020. China is not an exception and is experiencing diminished capital inflows and outflows," said the report.