Beijing Can’t Stop the Foreign Investment Exodus

Commentary

Beijing continues to roll out one “stabilize foreign investment” policy after another, but none of them has stopped the sharp decline in foreign direct investment (FDI).

The Chinese Communist Party (CCP) has recently adopted several policies, including the “24 measures” in 2024 and the “20 measures” in February. In August, it even revived tax perks that it had scrapped seven years ago.

Despite its efforts, FDI in China continues to fall, and the reasons cut far deeper than policy tweaks can reach.

According to China’s National Bureau of Statistics (NBS), actual foreign investment in 2024 fell to $116.2 billion—the lowest level since 2018, a decrease of 28.8 percent from $163.25 billion in 2023. In the first seven months of 2025, it came in at just $65.52 billion, or about 467.34 billion yuan, down by 13.4 percent year on year, according to the Ministry of Commerce.

China’s FDI slump is far steeper than the global trend. Data from the Organization for Economic Co-operation and Development show that growth in foreign investment into China dropped for three consecutive years between 2021 and 2024 after hitting a record high of $344.1 billion in 2021; meanwhile, global FDI declined by 11 percent in the same year, according to the United Nations Conference on Trade and Development.

Why FDI Has Been Collapsing in China

Several deep-seated factors are driving this decline.

Economic Fundamentals

Profitability for foreign companies in China has declined in recent years, according to NBS data. In 2021, large foreign-invested companies, including those from Hong Kong, Macau, and Taiwan, reported a record profit of $320.3 billion (about 2.28 trillion yuan). However, by November 2024, their profits had dropped to $247 billion, down from $252 billion in 2023 and $281 billion in 2022. The current profit level is nearly equivalent to what it was in 2016, which was $242 billion.

Policy Concerns

Foreign investors are uneasy about Beijing’s ever-changing policies. Three issues stand out.

Industrial Policy: Through policies such as “Made in China 2025,” Beijing has been pushing hard to upgrade its own industries, promote import substitution, and, at the same time, cut back on tax breaks for foreign firms.

Legal and Political Risks: A growing number of national security laws, including the anti-espionage and anti-foreign sanctions laws, which permit arbitrary raids and detentions of foreign nationals, have alarmed businesses.

Rising Anti-Foreign Sentiment

Recent years have seen an increase in assaults on foreigners, creating unease among foreign businesses.

In 2024, several violent incidents targeting foreigners raised international concern. In June, four college instructors from Iowa were stabbed in a public park in northeast Jilin Province. Earlier, in April and again in June, two separate knife attacks in Suzhou, a major city in Jiangsu Province, resulted in injuries to Japanese nationals. In September, a tragic incident occurred when a 10-year-old Japanese boy was fatally stabbed near a Japanese school in southern Shenzhen; he later died in the hospital.

Geopolitics

U.S.–China tensions are fueling decoupling and supply-chain shifts. Beijing’s global ambitions and “wolf warrior” diplomacy leave little room for anything but “strategic competition.” A survey by Bain & Company found that 69 percent of the chief executives of top global companies were actively moving production out of China in 2024—up from 55 percent in 2022.

With President Donald Trump back in the White House, he is implementing bold strategies that exceed expectations. The U.S.–China decoupling, along with the reshaping of global supply chains and the world economic order, is now accelerating.

Why Beijing Still Needs Foreign Capital

For decades, China’s rapid growth has been inseparable from FDI. By the end of 2024, foreign investors had set up more than 1.23 million enterprises in China, with cumulative inflows exceeding $2.88 trillion, according to Ling Ji, China’s vice commerce minister and deputy international trade representative.

He said at a news conference on Feb. 20 that these companies account for nearly 7 percent of all jobs (more than 30 million positions), one-seventh of China’s tax revenue, about one-third of imports and exports, and half of all machinery and high-tech exports.

FDI involves more than just financial transactions. As Chinese economic analyst Ma Yu put it, foreign capital is a “gateway to almost all of the world’s most advanced production factors—capital, talent, technology, products, management, standards, and global supply chains.”

Why CCP Policies Aren’t Working

With the continuous decrease of FDI, the CCP has been rolling out a flurry of new policies as discussed above. The problem is that none of these measures addresses the core issues. Foreign investors are questioning not just China’s policies but also the reliability of the CCP itself. In short, their confidence is waning.

To truly stabilize foreign investment, Beijing would need to take real steps in at least three areas:

• Let the market, not the state, play the decisive role in allocating resources, ensuring fair competition among the state, and private and foreign companies.
• Establish judicial independence, protect property rights and fundamental human rights, and allow peaceful political reform.
• Integrate with international norms—coexist peacefully with the United States and the West, and rejoin the global economic community.

But these are precisely the things that the CCP resists. Foreign investment will not return in a lasting way until there is a fundamental change in China.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.