Mr.Believer
posted on 25/03/2024
According to recent official data, foreign investment in China has reached its lowest point in three decades. This decline suggests that foreign companies may be departing China due to increased scrutiny on espionage and U.S. sanctions.
China's net foreign direct investment in 2023 stood at $33 billion, marking an 80% decrease from the previous year, as reported by the State Administration of Foreign Exchange. Although new investments exceeded outflows, this marks the second consecutive annual decline, representing less than 10% of the peak recorded in 2021 at $344 billion.
In 2023, foreign direct investment into China shank 8% year-on-year. In the first two months of 2024, foreign investment into China also fell 19.9% from the amount in January-February last year to 215 billion yuan ($30 billion).
Foreign corporations are downsizing their operations in China amidst heightened national security measures, including a crackdown on espionage. Tightened regulations on research firms and reports of foreign workers' detention have contributed to this trend. U.S., European, and Japanese companies face delays and uncertainties due to revisions in anti-espionage laws, impacting investment decisions and everyday operations.
With U.S. restrictions on China's semiconductor access, chip-related industries are shifting focus away from the country. China's share of global chip-related FDI dropped from 48% in 2018 to 1% in 2022, while the U.S. saw a surge to 37%.
Teradyne and Graphcore are among companies relocating operations from China. Automakers like Mitsubishi, Toyota, and Honda are adjusting operations due to increased competition.
China's economic slowdown, exacerbated by weak domestic demand and deflation risks, is deterring foreign investment. While China aims to attract investment by easing regulations, uncertainties persist regarding national security policies and economic growth prospects.
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