Inbound FDI to China Hits Lowest Levels Since November

In a concerning development for the economic ambitions of China, inbound foreign direct investment (FDI) has plunged by 27.9% in the first four months of 2024, reaching 360.2 billion yuan ($49.74 billion). This decline, revealed in data released by the Commerce Ministry, shows the ongoing challenges faced by Beijing in attracting foreign capital amidst a sluggish economy.

April witnessed a significant downturn, with only 58.5 billion yuan flowing in, marking the lowest monthly value recorded since November. Despite Beijing’s efforts to reverse the trend, including measures to enhance market access and relax visa rules, foreign investment continues to dwindle.

During the COVID-19 years, foreign direct investment in China had been on an upward trajectory before experiencing an 8% slump in 2023. Despite attempts to boost investor confidence, foreign business groups have expressed dissatisfaction with the lack of tangible improvements in the business environment.

A recent survey by the European Union Chamber of Commerce highlighted declining confidence in China as a top investment destination. Only 15% of respondents considered China their top choice for current investments, with a similar figure for future investments. Concerns about a slowing Chinese economy were cited as the primary worry for 39% of the surveyed companies.

Despite the overall decline, investment from Spain and Germany saw notable increases of 263% and 34.7%, respectively, during the January-April period. Additionally, foreign investment in China’s high-tech manufacturing industries accounted for 12.7% of the total, while the accommodation and catering sector experienced a significant jump of 65.1%.

Amidst soft domestic demand and property market challenges, Beijing faces an uphill battle to meet its growth target of “around 5%” for the year. The latest figures underscore the pressing need for meaningful reforms to attract and retain foreign investment amidst economic uncertainties.