Foreign direct investment in China falls to 30-year low (2024)

FAQs

Foreign direct investment in China falls to 30-year low? ›

A collapse in foreign direct investment into mainland China has brought FDI to a 30-year low. Beijing's State Administration of Foreign Exchange (SAFE) reports inbound investment from foreign sources at $33 billion for 2023, a staggering 90% drop from 2021 and the lowest level since 1993.

NET foreign direct investment (FDI) into the Chinese mainland plummeted to a 23-year low last year, government data showed on Friday (Mar 29). The US$42.7 billion inflow is less than a quarter of that seen in 2022.

BEIJING -- Investment in China by companies based abroad has sunk to the lowest level in 30 years, according to official data released on Sunday, in a sign that foreign corporations are leaving China due to tougher crackdowns on spying and U.S. sanctions.

FDI has contributed to higher investment and productivity growth, and has created jobs and a dynamic export sector.

HONG KONG -- China's inbound foreign investment shrank 26.1% on the year in the January-March quarter, to 301.7 billion yuan ($41.7 billion), despite Beijing's efforts to woo global companies.

China foreign direct investment for 2022 was $180.17B, a 47.64% decline from 2021. China foreign direct investment for 2021 was $344.07B, a 35.95% increase from 2020. China foreign direct investment for 2020 was $253.10B, a 35.22% increase from 2019.

Inbound FDI in China dropped 28.2% in the first five months of 2024 from the same period last year to 412.51 billion yuan ($56.8 billion), according to data released by the Chinese Ministry of Commerce on Friday. The figure was worse than the 27.9% drop in April and extended a streak since June 2023.

China has been witnessing a shift in the foreign investment landscape in recent years. After a significant FDI growth of 20.2 percent in 2021, the growth rate slowed to 8 percent in 2022, before hitting an 8 percent decline in 2023.

FALSE Between 1983 and today, annual foreign direct investment in China increased from less than $2 billion to $250 billion annually. According to many influential economists, the increase in international trade and cross-border investment will result in an increase in the prices of goods and services.

Trade Tensions and Geopolitical Uncertainty

These tensions have led to the imposition of tariffs, export restrictions, and other trade barriers, making it more challenging and expensive for U.S. businesses to operate in China.

Why are investors moving away from China? ›

Companies are uneasy about security controls, government protection of their Chinese rivals and a lack of action on reform promises, according to the European Chamber. They also are being squeezed by slowing Chinese economic growth and rising costs.

China's FDI in the United States (stock) was $28.7 billion in 2022, down 7.2 percent from 2021.

China overtook the U.S. as the world's top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy. New investments by overseas businesses into the U.S., which for decades held the No.

The largest source of foreign direct investment in China is what economist Barry Naughton calls “the China circle”, Hong Kong, Taiwan, and Macau. Among the three locations, Hong Kong has remained the largest source since the mid-1980s.

Hong Kong, the Virgin Islands, Japan, Singapore and the United States are among the major investors (data U.S. Trade Administration). Investments are mainly oriented towards manufacturing, real estate, leasing business and services, and computer services.

This spillover effect is especially strong for external design patents: a 1% increase in FDI inflow can lead to a 0.15% increase in the number of applications for external design patent according to the panel data estimation, and a 0.47% increase according to the pooled data analysis.

Data released last month by the State Administration of Foreign Exchange indicate that during the year to September 2023, a net outflow of more than $140 billion of long-term investment left China, or just under 1 per cent of China's GDP.

China remains, however, a relatively restrictive investment environment for foreign investors due to restrictions in key economic sectors.

China's drop in foreign direct investment (FDI) comes on the back of heightened tensions with the West, with many foreign companies pulling their capital out of the Chinese market.

Impact of FDI. FDI flows to China have contributed to GDP growth in at least two ways (see Chapter 6): Increased capital formation. This effect is estimated to have contributed about 0.4 percentage point to annual GDP growth in the 1990s.

Does China rely on FDI? ›

FDI and China's growth

China does not depend on foreign investment to finance its development: FDI accounts for only about 3% of total investment. Rather, FDI is important because it is a channel through which know-how, in the form of international best practice, is transferred to Chinese firms.

BEIJING, March 22 (Reuters) - Foreign investment flows into China shrank 19.9% in January-February from a year earlier to 215.1 billion yuan ($30 billion), data from the commerce ministry showed on Friday, even as the government gears up to woo foreign firms.

Currently, the main piece of legislation in relation to review of foreign investments (including transactions) is the Foreign Investment Law, which came into effect on 1 January 2020 and established for the first time in China a principle of national treatment between domestic companies and foreign investors (Article 4 ...

History. Soon after China's reform and opening up, the country adopted its first law on equity joint ventures in 1979, and the laws on wholly foreign-owned enterprises and cooperative joint ventures were enacted in the 1980s.

There is surprisingly little cross investment between the United States and China, the two largest economies in the world. Only 1 percent of the stock of U.S. direct investment abroad is in China, and in recent years the flow of direct investment from the United States to China has been close to zero.

Just about every region saw a significant decline in Chinese investment or construction projects except, surprisingly, for one: the Middle East and North Africa (MENA).

China's exports fell 17.5 percent in January 2009 and 25.7 percent in February 2009, compared to the corresponding months a year earlier. This was the worst performance in a decade. After partial recovery in March and April, exports were down in May by 27 percent on a year on year basis.