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Economics

China’s Foreign Investment Data Distorted by Hong Kong Flows

  • Mainland firms listed offshore funnel cash back into China
  • Investment is going into services, rather than manufacturing
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China’s government data show foreign investment into the economy grew by almost a fifth this year, a feat highlighted by officials as evidence global companies are resisting calls from US and European politicians to decouple from the country.

Yet, a look below the headline figure of 17.3% expansion in the first seven months of the year shows a less flattering picture. Much of the investment into China actually comes from Hong Kong, and is likely because mainland companies based there are routing funds through the city in a circular journey that’s called “round-tripping.”