As China’s foreign direct investment falls, is its charm campaign paying dividends or falling on deaf ears?

Name: Beijing raids offices of consulting firm Capvision in widening crackdown over national security
Uploaded: 2023-05-18T20:00:22.000Z
Duration: 2 min 28 s
Description: Beijing raids offices of consulting firm Capvision in widening crackdown over national security

FDI figures for the year’s first four months show momentum is slowing despite Beijing’s all-out push to lure overseas companies and investors

Less-than-ideal official data comes as China’s industrial output and retail sales growth in April undershot forecasts, and a weakening yuan does not help

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The latest official figures on foreign direct investment in China suggest Beijing still has work to do if it wants to attract foreign investors. Illustration: Lau Ka-kuen

Lo Hoi-ying

Published: 4:00am, 19 May 2023Updated: 4:31am, 19 May 2023

Despite Beijing actively wooing overseas investors as part of its post-pandemic economic recovery, China’s foreign direct investment (FDI) shrank in the first four months of the year.

The country’s actual utilisation of FDI reached US$73.5 billion in the January-April period, dropping by 3.3 per cent from a year earlier, according to data from the Ministry of Commerce on Wednesday.

The figures suggest that Beijing has still lots of work to lure foreign investors, who play vital roles in terms of China’s access to technology, funds and management expertise, especially as tensions with the United States persist and as Beijing’s raids on finance and due-diligence firms in the name of national security have raised concerns in the investor community.

China received US$39.71 billion worth of investments in the first two months of 2023, showing a 1 per cent year-on-year increase. The ministry, though, did not provide FDI figures in US dollar terms for the first quarter.

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Beijing raids offices of consulting firm Capvision in widening crackdown over national security

In yuan terms, China’s actual FDI grew by 4.9 per cent to 408.45 billion yuan (US$58 billion) in the first quarter of 2023, while foreign investments from January to February was 264.88 billion yuan, representing a 6.1 per cent increase, year on year.

The actual use of foreign investment measures the amount of money that China has already received when carrying out a contract with foreign companies, and the figure is released by the Ministry of Commerce every month as an indicator of FDI.

The slowing momentum comes as China’s industrial output and retail sales growth in April undershot forecasts.