China's economic landscape is undergoing a significant transformation as the latest balance of payments data paints a striking picture. For the first time in history, China has reported a quarterly decline in foreign direct investment (FDI). This unexpected shift underscores the challenges China faces in luring overseas companies and capital, mirroring our earlier prediction of mounting capital outflow pressures.

📈 Direct investment liabilities, encompassing FDI and foreign companies' retained earnings in China, have been on a steady decline over the last two years. From an impressive peak of over $101 billion in the first quarter of 2022, this crucial indicator has progressively weakened, culminating in a deficit of $11.8 billion during the July-September period. This marks a significant turning point, as it is the first contraction recorded since the inception of records in 1998. This downturn may be attributed to the "de-risking" strategies adopted by Western governments in their dealings with China, as well as China's ongoing interest rate disadvantage.