According to theWorld Investment Report 2023published by UNCTAD, FDI inflows into China increased by 4.5% year-on-year in 2022, totalling USD 189.1 billion (above the pre-COVID level), making the country the second-largest host country in the world. The increase was concentrated in manufacturing and high-tech industries (mainly electronics and communication equipment) and came mostly from European MNEs. Cross-border M&A sales tripled to USD 15 billion. The largest deals were the 4 billion USD acquisition by BMW (Germany) of a further 25% stake in BMW Brilliance Automotive, a Beijing-based manufacturer and wholesaler, and the USD 3.4 billion merger of COVA Acquisition (United States) and ECARX Holdings, a Shanghai-based manufacturer of semiconductors and electronics. In the same year, the total stock of FDI stood at USD 3.82 trillion, around 21.1% of the country’s GDP. China is also the third-largest investor worldwide, with a stock of outward FDI estimated at USD 2.93 trillion at the end of 2022. Hong Kong, the Virgin Islands, Japan, Singapore and the United States are among the major investors (data U.S. Trade Administration). Investments are mainly oriented towards manufacturing, real estate, leasing business and services, and computer services. Data from the Peterson Institute for International Economics and sourced from China’s State Administration of Foreign Exchange (SAFE) shows FDI inflows have hit multi-year lows in 2023, totalling only USD 15 billion. Among the reasons for the decrease were escalating geopolitical tensions, as the “chip war” with the U.S. concerns foreign investors, particularly American-headquartered companies operating in China, leading to hesitancy in investing in local firms. Moreover, the closure of due diligence firms, essential for foreign investors to make informed decisions regarding Chinese companies, coupled with a new national security law targeting cross-border data flows, has discouraged significant investments.
Over the last few years, China made improvements in a wide array of subcomponents ranging from procedures for starting a business to measures to improve electricity access and get construction permits. The country demonstrated reform agendas that aim to improve the business regulatory environment. The reforms mainly focus on increasing the efficiency of business processes, such as tax cuts, trade with tariff cuts, and reduced barriers to foreign investors. In order to attract further foreign investment, the country has introduced mechanisms to improve the delivery of major foreign investment projects, reduce import tariffs, streamline customs clearance, and establish an online filing system to regulate FDI. With a wealth of employees and potential partners eager to learn and evolve, the country is a base for low-cost production, which makes it an attractive market for investors. Nevertheless, certain factors can hinder investments, such as China’s lack of transparency, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which favour local businesses. The revised investment screening mechanism under the Measures on Security Reviews on Foreign Investments took effect on January 18, 2021, without any public comment period or prior consultation with the business community. Foreign investors expressed dissatisfaction with China's new investment screening rules, citing their broad scope, lack of an investment threshold triggering a review, and inclusion of greenfield investments, a departure from practices in most other countries. Additionally, concerns grew among foreign investors due to new guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, a measure akin to "blocking statutes" in other markets, exacerbating worries about the legal complexities of complying with both host-country regulations and those in China. Foreign investors lamented that national security-related legislation increasingly undermined market access in China. Finally, the country ranks 12th among the 132 economies on theGlobal Innovation Index 2023and 151st out of 184 on the2023 Index of Economic Freedom.
FAQs
FDI in Figures. According to the World Investment Report 2023 published by UNCTAD, FDI inflows into China increased by 4.5% year-on-year in 2022, totalling USD 189.1 billion (above the pre-COVID level), making the country the second-largest host country in the world.
Is foreign investment allowed in China? ›
So far, most foreign investment projects in China were approved in the forms of: 100% owned LLC enterprise (ex-WFOE) with solely foreign capital. Or sino-foreign Joint Ventures invested with a Chinese partner. The representative office is still a valid legal form but can not directly engage in business activities.
Can you invest in China as a foreigner? ›
Since 2003, A Shares have been accessible to international investors through the Qualified Foreign Institutional Investor (QFII) system. The QFII program allows specified licensed international investors to buy and sell on mainland China's stock exchanges.
Who is the largest foreign investor in China? ›
Who are the investors? International financial hubs play an important role in directing foreign financial streams to China. According to official accounts, almost 56 percent of the inward Chinese FDI stock in 2022 had entered China through Hong Kong, while a substantial share also came from the Virgin Islands.
What is the foreign investment rate in China? ›
Data are in current U.S. dollars. China foreign direct investment for 2022 was $180.17B, a 47.64% decline from 2021. China foreign direct investment for 2021 was $344.07B, a 35.95% increase from 2020. China foreign direct investment for 2020 was $253.10B, a 35.22% increase from 2019.
Can I invest money in China? ›
The easiest way to invest in the whole Chinese stock market is to invest in a broad market index. This can be done at low cost by using ETFs. On the Chinese stock market you'll find 12 indices which are tracked by ETFs. The speciality of China are the three categories of Chinese stocks: A-stocks, B-stocks and H-stocks.
Is China open to international trade? ›
Since 1979 the country has changed it's policies to promote increased foreign trade and investment, thereby attracting more direct investment to China than to any other developing country in recent years.
Is it risky to invest in China? ›
Some of the risks associated with investing in China include its communist structure, regulatory differences, and insider trading. Investment opportunities in China include U.S. corporations that have a presence in the country, mutual funds, and ETFs.
Can a US citizen buy property in China? ›
So, can foreigners buy property in China? The answer is yes, foreigners are allowed to purchase property in China! The essential requirement is that you have studied or worked in China for at least one year on a residence permit. Foreigners are allowed to only own one residential property for dwelling purposes.
Can US citizens own Chinese stocks? ›
Buying stocks directly in a foreign market like India or China is possible, although it might be harder than purchasing domestic shares. Investors can purchase American Depositary Receipts on U.S. exchanges, which are certificates that represent shares in a foreign company. China A-shares are open to foreign investors.
The slowdown in the economy and rising geopolitical tensions has led some companies to reduce their exposure, and the rapid shift to electric vehicles in China also caught foreign car firms off guard, prompting some to withdraw or scale back their investments.
Which country does China invest most in? ›
North America and Europe
| Top Destinations for Chinese FDI in North America and Europe (2005 – 2019) |
|---|
| Country | Total FDI (Billions of US$) | Global Ranking |
|---|
| United States | 183.2 | 1 |
| United Kingdom | 83.0 | 3 |
| Switzerland | 61.6 | 4 |
3 more rowsCurrently, the main piece of legislation in relation to review of foreign investments (including transactions) is the Foreign Investment Law, which came into effect on 1 January 2020 and established for the first time in China a principle of national treatment between domestic companies and foreign investors (Article 4 ...
What is the average return on investment in China? ›
Average returns
| Period | Average annualised return | Total return |
|---|
| Last year | -10.6% | -10.6% |
| Last 5 years | -3.7% | -17.2% |
| Last 10 years | 2.8% | 31.8% |
| Last 20 years | 8.0% | 363.5% |
The second-largest economy in the world offers foreign investors a wide range of opportunities to explore, from the traditional industries, such as retail and wholesale, to the emerging sectors like green energy, advanced manufacturing, technology and innovation.
Is use of foreign currency legal in China? ›
The circulation and use for quoting prices and settling accounts of foreign currencies shall be prohibited in the People's Republic of China. All units and individuals have the right to report and expose behaviors and activities violating regulations on foreign exchange control.
Are foreign companies allowed in China? ›
Foreign companies are to do business in China but keep their hands off Chinese data. Multinationals are to double down on China and homegrown brands are meant to give them a run for their money. China's technology industry is to decouple from the West while attracting Western investment.
What is China's policy on FDI? ›
Over the years, the People's Republic of China (hereafter referred to as “China”) has developed a complex legal framework, promoting foreign direct investments with preferential policies (sometimes more preferential than for Chinese investors), while imposing market access barriers aimed at limiting or eliminating ...
Does China allow foreign ownership of property? ›
Foreigners are allowed to own residential property in China for a maximum of 70 years. After this time, the ownership rights will revert to the Chinese government. It's important to note that this 70-year limit applies to the land on which the property is built, not the actual building itself.
