Foreign Investment Into China Hit 3-Year Low in January

February 20, 2025 TruthUSA

Despite Beijing’s efforts to woe back investors, China saw a record high of $168 billion in net foreign direct investment withdrawal in 2024.

Foreign direct investment into China declined by 13 percent year-on-year in January, official data released on Feb. 19 show, highlighting the difficulties Beijing faces in winning back foreign companies amid ongoing geopolitical tensions.

The Chinese Ministry of Commerce reported that utilized foreign direct investment plummeted to 98 billion yuan ($13 billion) in January, marking the lowest start to the year in three years. This figure is down from 113 billion yuan ($16 billion) in the same month last year and from 128 billion yuan ($18 billion) in January 2023.

The decline in inbound investment by foreign entities follows a year of efforts by Chinese authorities that have struggled to boost the country’s faltering economy. Issues such as an ongoing real estate crisis and sluggish consumer demand continue to weigh heavily on the world’s second-largest economy.

These economic challenges are further compounded by rising tensions with its major trading partners, particularly the United States.

Earlier this month, President Donald Trump imposed an additional 10 percent tariff on Chinese products, citing concerns about the influx of fentanyl-related chemicals coming from China. Minutes after the extra levies took effect on Feb. 4, the Chinese regime announced a series of retaliatory measures, including an investigation of Google by its competition watchdog.

Beijing’s Ministry of Commerce, meanwhile, added the PVH Group, a U.S. retail giant that owns brands such as Calvin Klein and Tommy Hilfiger, and Illumina Inc., an American gene sequencing company, to its trade blacklist, known as the “unreliable entities list.” Companies on this list are prohibited from participating in import and export activities and from investing in China.

Amid escalating geopolitical tensions and an economic downturn, China has sought to woo back overseas investors. On Feb. 18, the regime rolled out an initiative pledging to create new incentives aimed at stabilizing foreign investments in 2025.

Chinese officials repeatedly reaffirmed the regime’s commitment to supporting international businesses. On Feb. 17, Vice Premier He Lifeng hosted a group of Japanese business executives in Beijing, encouraging them to expand their investments in China.

Last March, Chinese leader Xi Jinping also attended a meeting with U.S. business leaders, urging them to continue to invest in the country. At that time, foreign entities had become increasingly wary of the Asian power following a series of regulatory clampdowns, which included hefty fines and the arrests of their employees.

‘Most Restrictive Investment Climate’

Nevertheless, the momentum of the foreign capital exodus appeared to show little sign of easing. Over the past year, actual foreign investment fell by 27 percent, following an 8 percent decline in 2023, according to data released by the commerce ministry on Jan. 17.

This downturn was also reflected in figures from China’s State Administration for Foreign Exchange (SAFE), which gauges foreign investment on a net basis.

In 2024, China experienced a record high of $168 billion in net foreign direct investment withdrawal, according to preliminary data released by SAFE on Feb. 14. This figure is even worse than in 2023, when net inflows still totaled $42.7 billion.

Outside observers say the decline in investment might be more severe than the official figures indicated, pointing to Beijing’s stepped-up efforts to stabilize overseas investment.

“With so many measures being rolled out, the outflow of foreign capital has reached a point that scares the Chinese Communist Party,” Frank Tian Xie, a professor in the School of Business Administration at the University of South Carolina Aiken, told The Epoch Times.

Xie expressed skepticism regarding Beijing’s incentives to draw back foreign investors, pointing to the contradictions in its approach. While Chinese officials urge overseas and private companies to maintain or increase their investments, in an attempt to help revitalize the economy, they simultaneously tighten control over these companies and demand adherence to the Chinese Communist Party’s directives.

“The Chinese communist regime continues to exert pressure even while seeking help. It’s no wonder that foreign investors are hesitant about staying in the country,” Xie said.

According to the U.S. State Department’s 2024 investment climate statement on China, key concerns affecting the confidence of U.S. companies include China’s “excessive” cybersecurity and data privacy regulations, “preferential treatment” for domestic competitors, “an opaque regulatory system,” and “inconsistent application of laws protecting intellectual property rights.”

The Trump administration also highlighted U.S. businesses’ concerns on the State Department’s website.

“China’s economy is one of the most restrictive investment climates in the world, including for U.S. investors,” the department stated in a fact sheet updated on Feb. 13.

“China also engages in unfair trade practices, including using forced labor and massive state subsidies, putting American businesses at a disadvantage and making them complicit in China’s human rights abuses.”

Luo Ya contributed to this report.

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