China Stats Show Shift From FDI To Investment Abroad

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In the first half of this year, China's foreign direct investment (FDI) fell 29.1% to 498.9 billion yuan (US$69.5 billion) from the same period of last year, the Ministry of Commerce said last month. The country's overseas direct investment (ODI) increased 16.6% to US$72.62 billion.

“Some foreign investors have recently reduced their investments in China or even left the country as they were affected by the ideology of de-globalization, as well as the de-Sinicization campaign promoted by the United States,” Mao Zhenhua, the founder and president of China Chengxin Credit Management Company and the co-director of Renmin university's Economic Research Institute, says in an article published on Monday.

He says that, despite the trend, foreign investors' role in China has remained the same because the country still needs to rely on the West to bring in high technologies.

“There are some opinions in the society that people who work for foreign firms or buy foreign goods are not patriots,” he says.“There are also some views that mistakenly interpret China's exports as a favor to other countries, especially to the US.”

He says people with these views should correct themselves and understand that China's trade with other countries is done according to the mutual-benefit principle. He says China should be friendly to customers from all countries and provide a good business environment to foreign companies.

Besides, he says, Chinese companies should not be criticized for investing in foreign countries as many of them need to build their overseas production capacity, either to cut costs or to avoid new tariffs irrationally imposed by western countries.

He says Chinese firms' overseas investment can help strengthen China's supply chain and stabilize the Chinese economy over the long run.

Chinese workers in pain

An unnamed spokesperson of the Ministry of Commerce said on July 13 that it is natural that FDI declined in 2023 as the figure had kept growing annually for a decade between 2013 and 2022.

The spokesperson said China will further open up to attract more foreign investors.

“For some time, some Western media have hyped the theory of 'foreign capital leaving China' but their misleading reports ignored the fact that the structure of foreign investment in China is constantly being optimized,” Guan Tao, chief economist with Bank of China International Holdings Co, says in a commentary published on July 18.

Guan says the proportion of foreign investment in China's high technology manufacturing sector to overall FDI has continued to grow so far this year.

Citing UN Trade and Development's World Investment Report 2024 , he points out that global FDI actually can be shown to have declined by more than 10% last year if the large swings in investments flows in a few European conduit economies are excluded.