China Center Chart Dive: With capital flight seemingly under control, a resurgence in Chinese outbound FDI may be in the offing

The widely reported regulatory clampdown on China’s Outbound Foreign Direct Investment (OFDI) may be over – for the time being.

The curbs focused primarily on containing massive foreign M&A deals led by “private” Chinese conglomerates – in particular “gray rhinos.” These deals, criticized by the government as wasteful and misguided, have to all intents and purposes been stopped. Moreover, some “gray rhino” assets have been forcefully shuffled, ostensibly to pay off the massive debts these firms accrued by way of their M&A sprees abroad.

China’s official monthly OFDI data, which tracks realized nonfinancial net OFDI flows, shows an uptick in the June and July data (+USD 13.6 bln and +USD 9.0 bln, respectively), and may indicate that the government’s policies are relaxing – at least for certain kinds of foreign deals.