China’s Decline in Foreign Investment: An Analysis of the Causes and Solutions

In the first quarter of 2023, China experienced a decline in foreign investment, with capital falling by 26.1% to 301.7 billion yuan or 41.7 billion USD compared to the same period last year. This was the weakest first quarter since 2020, according to data from the Chinese Ministry of Commerce. The decline in foreign investment has been gradual over the past three months, decreasing from 113 billion yuan in January to 102 billion yuan in February and 90 billion yuan in March.

Despite this decline, China’s deputy director of foreign exchange administration, Xu Zhibin, stated at the Boao Forum for Asia last month that China’s foreign direct investment developments were “basically in line with global trends.” The country is making efforts to attract more investors, as seen in Premier Li Qiang’s pledge at the China Development Forum in Beijing in March to improve the business environment and implement reforms in key areas to create a “more open China” and collaborate with the world.

To promote foreign investment, China announced measures on April 19, including support for foreign organizations to issue bonds in yuan domestically and loosening restrictions on foreign strategic investments in Chinese listed companies. Beijing is also encouraging foreign technology companies to raise funds through bond issuance and creating favorable conditions for foreign investors to participate in Chinese technology companies. Additionally, the country plans to approve foreign investment in Chinese stocks and bonds efficiently.