Asharq Al-Awsat

 China will make greater efforts to diffuse debt risks of financing platforms, said Chinese premier Li Qiang in a meeting focusing on mitigating risks of local government debt on Friday.

China will resolutely block the path for irregular and disguised debts and strictly prevent the risk of newly-added debts, said Li.

The Commerce ministry said on Friday that foreign investment into China fell 19.9% in the first two months of 2024 from the amount in January-February last year to 215 billion yuan ($30 billion).

China on Tuesday unveiled new steps to arrest a slowdown in foreign investment, including expanding market access and relaxing some rules.

Overseas firms have turned sour on China since it enacted ultra-strict COVID curbs during the pandemic then suddenly abandoned them in late 2022, with concerns over the business environment, a shaky economic recovery and rising geopolitical tensions with the West weighing on confidence.

A series of prolonged regulatory crackdowns on sectors from technology to education have also rattled domestic and foreign investors, adding to unease over policy transparency in China.

US Commerce Secretary Gina Raimondo said last year that American businesses had told her that China was becoming “uninvestible.”

In 2023, foreign direct investment into China shank 8% year-on-year.

Of the foreign investment in the first two months, 71.44 billion yuan, or a third of the total, went into China's high-tech industries, including high-tech manufacturing, the ministry said.

Foreign investment in China's construction sector rose 43.6% year-on-year, while investment in wholesale and retail industries grew 14.5%, it added.

In return, China’s central government accelerated spending at the start of the year, a sign it’s taking on more financing responsibility to support the economy and to avoid worsening local government debt risks, Bloomberg reported.

Its general public expenditure jumped 14% from a year earlier to 482.8 billion yuan ($66.8 billion) in January and February combined, the fastest pace for the period in five years, according to data provided by the Ministry of Finance.

Bloomberg said Beijing is gradually shifting the responsibility for supporting economic growth to central government from local officials — a way to maintain the level of investment while defusing local debt risks.

Local governments have been struggling after a property crisis reduced a critical source of income from land sales, and a slowing economy weighed on tax revenues.

The latest data shows Beijing intends to “underpin growth while preventing risks,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd.

Central and local authorities spent almost 700 billion yuan in the first two months on agriculture, forest and irrigation-related issues, as well as urban and rural community development. This is up 22% from a year earlier.

In a separate development, China's securities regulator launched onsite inspections of some mutual fund companies as part of efforts to strengthen management of the industry, unnerving fund managers.

The securities watchdog, under newly appointed Chairman Wu Qing, vowed a week ago to set up a “textbook-style” supervision model to regulate China's $3.8 trillion mutual fund industry, according to Reuters.

The latest round of inspections, conducted without notice by branches of the China Securities Regulatory Commission (CSRC), covered daily operations, training, and strengthening internal Chinese Communist Party functions, the 21st Century Business Herald reported on Friday. It did not name the asset managers inspected.

In response to a Reuters query, CSRC said: “It's regular on-site inspection that we conduct every year.”

The CSRC branches inspected fund companies based outside their regions, which the article said can prevent local interference. Regulators have recently cracked down on computer-driven “quant” private funds.