Despite a general decline in foreign direct investment (FDI) in China, the country has observed an increased flow of overseas funds into its advanced manufacturing sector. Zhu Bing, director of the Foreign Investment Administration under the Ministry of Commerce, highlighted during a recent press briefing that while the overall FDI for the first half of the year has decreased compared to the previous year, there has been significant growth in specific sectors.
From January to June, China’s FDI fell by 29.1% year-on-year, totaling 498.9 billion yuan (approximately US$69 billion). This decline is largely attributed to a high base effect from the previous year’s substantial investments. Despite the overall downturn, the manufacturing sector saw an investment increase of 2.4 percentage points, representing 141.86 billion yuan and accounting for 28.4% of all FDI received in the first half of the year.
Particularly noteworthy is the investment in hi-tech manufacturing, which also increased by 2.4 percentage points, reaching 63.75 billion yuan. This indicates a strategic shift among foreign investors who are adjusting their investment plans across various industries, focusing on sectors poised for growth and innovation.
To enhance its appeal to foreign investors, Beijing has pledged to dismantle market-access barriers as outlined in a negative list that restricts foreign investments in specific sectors such as healthcare and telecommunications. Although these changes have been implemented in certain free-trade zones, a nationwide rollout remains pending. Premier Li Qiang has expressed commitments to open more sectors to foreign investment and to eliminate foreign investment thresholds in manufacturing completely.
However, without a definitive timeline for these promised reforms, investor sentiment has been affected, exacerbated by China’s slowing domestic demand and economic uncertainties. Feedback from various foreign chambers of commerce over the past year reflects waning confidence among international investors regarding the Chinese market.
Nonetheless, Zhu assured that sectors like telecommunications, internet, education, culture, and medicine would be gradually opened to foreign investments in an orderly manner. Despite the overall drop in FDI, specific segments such as the manufacturing of medical equipment and measuring devices witnessed substantial growth, with increases of 87.5% and 43.4% respectively, in the first half of the year.
Moreover, investments from Germany and Singapore into China saw notable increases of 18.1% and 10.5% respectively during the same period. Meanwhile, China’s outbound non-financial investments surged by 19.5% to 516 billion yuan, demonstrating the country’s robust international investment activities despite domestic challenges.
As China navigates these economic adjustments and market openings, the global investment community continues to monitor these developments closely, anticipating potential opportunities that may arise from the nation’s evolving economic landscape.
