Foreign direct investment (FDI) in China

FDI in Figures

According to the World Investment Report 2026 published by UNCTAD, FDI inflows into China decreased by 10% year-on-year in 2025, totalling USD 104.7 billion. Nevertheless, the country was still the fourth-largest FDI recipient in the world, accounting for 6.4% of global FDI. At the end of the same period, the total stock of inward FDI stood at USD 3,754.9 billion. China is also the third-largest investor worldwide. Among the top multinationals, the largest manufacturing investors in China include Hon Hai Precision Industry (Taiwan), BASF (Germany), and car manufacturers like Toyota (Japan), Volkswagen and BMW (Germany), and Samsung Electronics (South Korea). These companies have long maintained significant manufacturing operations in China. However, since 2019, they've reduced greenfield investments in favour of partnerships with local manufacturers, particularly in the EV market. Hon Hai and Samsung have reassessed their manufacturing footprint in China due to trade tensions. A large portion of their high-tech products, like chips and electronics, are produced in China and exported to the U.S. Hon Hai cut its greenfield projects in China from 23 to 6, while Samsung reduced its from 9 to 1. Both companies are now investing in new facilities in their home markets and countries like Vietnam, India, and Mexico. Official governmental data show that, in 2024, China saw 59,080 new foreign-invested enterprises, a 9.9% increase from the previous year. However, actual FDI utilization fell 27.1%, totalling CNY 826.25 billion (USD 115.56 billion). The manufacturing sector received CNY 221.21 billion (USD 30.85 billion), while the service sector attracted CNY 584.56 billion (USD 81.47 billion). High-tech manufacturing led high-tech sectors with CNY 96.29 billion (USD 13.42 billion), making up 11.7% of total FDI. Notable growth occurred in medical instruments (+98.7%), professional technical services (+40.8%), and computer and office equipment (+21.9%). Among source countries, Spain saw the largest increase in investment (+130.8%), followed by Singapore (+10.8%), Germany (+2.2%), and Switzerland (+1%).

In recent years, China has made significant improvements across various subcomponents, from streamlining the process for starting a business to enhancing electricity access and simplifying construction permit procedures. The country has implemented a series of reforms aimed at improving the overall business regulatory environment. These reforms primarily focus on improving the efficiency of business processes, including tax cuts, tariff reductions, and lowering barriers for foreign investors. To attract more foreign investment, China has introduced mechanisms to improve the implementation of major foreign investment projects, reduce import tariffs, streamline customs clearance, and establish an online filing system to regulate FDI. With a large pool of employees and potential partners eager to innovate, China remains an appealing base for low-cost production, making it an attractive market for investors. However, certain factors continue to pose challenges to foreign investment, including a lack of transparency, legal uncertainty, weak intellectual property rights protection, corruption, and protectionist policies that favour local businesses. The revised investment screening mechanism under the Measures on Security Reviews on Foreign Investments, which came into effect on January 18, 2021, was implemented without a public comment period or prior consultation with the business community. This move has drawn criticism from foreign investors, who raised concerns about the broad scope of the new rules, the absence of a threshold for triggering reviews, and the inclusion of greenfield investments—an approach that deviates from practices in many other countries. Furthermore, the introduction of guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, similar to "blocking statutes" in other markets, has heightened concerns about navigating the complex legal landscape and complying with both host-country regulations and Chinese laws. Foreign investors have expressed frustration over national security-related legislation, which is increasingly seen as restricting market access in China. Additionally, on 1 November 2024, China issued revised regulations for foreign investment in its listed companies, lowering the minimum overseas assets requirement for strategic investors from USD 100 million to USD 50 million. Finally, the country ranks 11th among the 133 economies on the Global Innovation Index 2024 and 151st out of 184 on the latest Index of Economic Freedom. It also ranks 76th/180 on the 2024 Corruption Perception Index.

What to consider if you invest in China

Strong Points

Strong points for FDI in China include:

• Extensive and competitive manufacturing capabilities, a leader in green tech and semiconductors
• Dominance in the supply of scarce metals and minerals critical for advanced production
• Diversified export products and destinations
• Significant presence in emerging and developing countries through the BRI
• Relatively low external energy and food dependency
• Good level of transport and utility infrastructure
• Public debt mostly denominated in domestic currency
• High level of FX reserves

Weak Points

Some of the disadvantages for FDI in China include:

• US-China strategic competition, trade war and US sanctions on technology transfer
• Excess production capacity in a wide range of products
• Elevated real estate inventory burden
• Reliance on the Strait of Hormuz for crude oil and natural gas supply
• Fragility of trade routes with Europe
• Opaque local government hidden debt levels
• Ageing population
• High youth unemployment
• Deteriorating private sector and consumer confidence, undermined by a weak social safety net
• Unclear political succession plans

Government Measures to Motivate or Restrict FDI

ansfer of technology, while technology cooperation on the basis of free will and business rules is encouraged by the state. Indeed, article 22 stats that the State shall protect the intellectual property rights of foreign investors and foreign-funded enterprises. The law also gives the possibility to foreign investors to receive the same treatment when they apply for licences (article 30) and participate in public procurement (article 16). The competent departments for commerce (Ministry of Commerce) and for investment (National Development and Reform Commission) are delegated major responsibility to promote, protect and manage foreign investment.

On June 23, 2020, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOF) jointly issued two "negative lists" (on Foreign Investment and Free Trade Zone Special Administrative Measures) and a draft edition of the Catalogue of Encouraged Industries for Foreign Investment. Compared with the 2019 edition (full list in Chinese available here), the proposed 2020 Foreign Investment encouraged catalogue has been further lengthened, with 125 new industries added and 76 previously listed industries amended. There are no major changes compared to the 2019 catalogue; it welcomes more FDI in the following three main areas of China: high-end production; production-oriented service industries; China’s central, western, and northeastern provinces.

Bilateral investment conventions signed by China

China has signed bilateral agreements for investments with several countries. To see the list of the countries, consult UNCTAD website.