China’s FDI Sees Most Substantial Decline Since February 2020

China’s Ministry of Commerce recently reported a significant 10% decrease in actual foreign direct investment (FDI) on the mainland.

This drop occurred over the first 11 months of 2023. The total investment fell to about 1.04 trillion yuan, equivalent to $146.45 billion.

Bloomberg provided a deeper analysis using official data. Their findings reveal a more worrying trend.

In November, China received 53.3 billion yuan in new foreign capital. This amount shows a 19.5% decline from the previous year.

This decline is the most substantial since February 2020. It coincides with the early stages of the COVID-19 pandemic.

The pandemic, geopolitical tensions, and a slower economy likely discouraged foreign businesses from investing.

The report continues, highlighting a negative turn in FDI for the third quarter. This downturn was the first since 1998.

It suggests companies are less willing to reinvest profits in China. They are likely seeking higher returns elsewhere, especially compared to the U.S.

Despite the overall decline, there were some positive trends. Official data indicates that China established 48,078 new enterprises with foreign investment during this period.

As Xinhua News Agency reports, This is a 36.2% increase from the previous year. Investment in the high-tech sector grew by 1.8% year-on-year.

Particularly, the medical equipment and communication equipment sectors increased by 27.6% and 5.5%, respectively.

Lastly, FDI from the United Kingdom, France, and the Netherlands showed remarkable growth.

The UK’s investment surged 93.9%, France’s 93.2%, and the Netherlands’ 34.1%. These increases demonstrate a continuing international interest in specific Chinese markets.

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