Net foreign direct investment (FDI) into mainland China fell to its lowest level in 23 years last year, Caixin Global reported, citing official figures released by the Chinese State Administration of Foreign Exchange (SAFE).
The total inflow of FDI amounted to $42.7 billion, marking a significant decline from the previous year’s figures and adjusting upwards from an initial estimate of $33 billion by SAFE.
Net FDI, which is calculated through China’s capital and financial accounts, indicates the movement of funds to and from the mainland for investments in sectors like manufacturing and real estate by foreign-owned entities.
Another measure provided by the Ministry of Commerce revealed that the total utilized FDI in China decreased by 8% to 1.1 trillion yuan ($205.9 billion) in 2023.
Despite the overall downturn, there was a net inflow of $14.1 billion in overseas entities’ securities investment in China, marking a significant shift from the previous year’s net outflow. This change was largely due to increased foreign investment in Chinese bonds, which saw a net inflow of $6.6 billion, contrasting with a substantial net outflow the year before.
Chinese authorities have adopted varius measures to in response to dwindling foreign investor confidence. These include the issuance of a 24-point guideline in August which ensures that foreign companies receive equivalent government support as local businesses.
The 24-point plan from the State Council promises to loosen regulations on the overseas transfer of data, among other measures. The policies are intended to address long-standing concerns held by foreign companies about their ability to compete fairly in the government procurement process and protect their intellectual property, among other things.
Chinese authorities announced 2023 as the “Year of Investing in China.” But this initiative was met with skepticism by international businesses, which cited challenges such as the complex business landscape, unpredictable policy decisions, deteriorating geopolitical relations, and concerns over the state of China’s economy.
