Core Viewpoint - China's foreign direct investment (FDI) landscape has experienced significant fluctuations in recent years, particularly since 2022, with a notable shift from net inflows to net outflows, raising concerns about "de-Chinaization" in global supply chains. However, preliminary data from the State Administration of Foreign Exchange indicates a reversal in this trend in 2023, with net outflows decreasing and net inflows returning, despite ongoing external pressures [3][5][15]. Group 1: Trends in Cross-Border Direct Investment - Historically, China has been a major recipient of foreign investment, with a shift towards balancing inbound and outbound investments since the early 2000s. Prior to 2022, China consistently recorded a surplus in cross-border direct investment, contributing to the resilience of its international balance of payments [4][5]. - The COVID-19 pandemic initially boosted China's direct investment surplus in 2020 and 2021, with surpluses reaching $165.3 billion in 2021, the highest since 2014. However, this trend reversed in 2022, leading to significant net outflows in subsequent years [5][6][10]. - From 2021 to 2024, China's cross-border direct investment shifted from a surplus to a deficit, with a total increase in net outflows of $319 billion. This was primarily driven by a sharp decline in net inflows of foreign direct investment [6][10]. Group 2: Factors Influencing Investment Flows - The decline in foreign direct investment inflows from 2021 to 2024 was largely due to a significant drop in equity investment inflows and a reversal in inter-company debt flows. Equity investment inflows decreased from $300.6 billion to $72.8 billion, contributing 70% to the overall decline in foreign direct investment inflows [8][10]. - The net outflow of equity investment remained stable, while inter-company debt flows saw a significant reversal, indicating a complex interplay of factors affecting cross-border investment dynamics [14][25]. - In 2023, net outflows of cross-border direct investment decreased by 50.8% year-on-year, primarily due to increased net inflows of foreign direct investment and reduced net outflows of direct investment [15][19]. Group 3: Government Response and Market Outlook - The Chinese government has recognized the need to mitigate external shocks and has implemented measures to enhance foreign investment, including easing restrictions and optimizing the business environment [15][16]. - Despite external pressures, key economic indicators have shown resilience, with foreign direct investment net inflows increasing in 2023, reflecting a stabilization in foreign capital withdrawal [21][24]. - The overall investment climate remains cautious, with domestic enterprises adopting a rational approach to overseas investments amid geopolitical tensions and economic challenges [26][27].

Core Viewpoint - The Chinese financial market has demonstrated resilience against external shocks this year, exhibiting a "dual rise" in both stock and currency markets, with optimism surrounding the RMB's rebound and future exchange rate trends [1] Group 1: Financial Market Performance - The Chinese financial market has withstood high-intensity external shocks, resulting in a "dual rise" in stock and currency markets [1] - The RMB has stopped declining and is showing signs of recovery, leading to a generally optimistic outlook for the exchange rate in the coming year [1] Group 2: Future Outlook and Strategy - There is a prevailing sentiment regarding the re-evaluation of the RMB, with discussions around breaking the 7 mark and entering a new economic cycle [1] - In the context of the 14th Five-Year Plan, the market faces both strategic opportunities and challenges, with increasing uncertainty [1] - Instead of betting on a new economic cycle, it is suggested to adapt to the new normal of dual-directional fluctuations in the exchange rate [1]