Chart of the Week: Fathom’s estimate of China’s cross-border capital flows falls sharply

Over the past few years, Fathom Consulting has developed a range of bespoke tools to assess China’s economic performance, specifically its efforts to upgrade its enormous manufacturing base, its growth strategy, and its cross-border capital flows. The latter, which has resulted in a custom-built Capital Flows Database, is part of a major ongoing consultancy project. It tracks foreign direct investment from China to the rest of the world, at deal level, by country and by sector.

The data currently holds over 27,000 deals from 2005 to July 2019, and acts as a more reliable and timely source than alternative providers of capital flows data.

Unlike other sources, our database removes measurement issues such as round-tripping (non-cross-border flows), while properly accounting for pass-through investment (deals conducted via foreign acquirors). M&A deals with no openly published value are also estimated, and data on greenfield and expansion of capital are included. Reassuringly, the trend in our measure of China’s cross-border capital flows is not dissimilar from that reported by the IMF or MOFCOM (China’s Ministry of Commerce), although our methodology means that we successfully capture more than double the value reported by these alternative sources in some years.

Notably, both the total value (as shown in the chart) and total number of deals has fallen sharply from a peak in 2016. Since that time scrutiny of China’s efforts to grab know-how through the acquisition of strategic assets has put its activity in the spotlight. For more information on this and our Capital Flows Database please contact Leara Gabay on leara.gabay@fathom-consulting.com

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