China's Call for Openness Proved Ineffective... FDI Hits 4-Year Low

China's foreign investment scale has plummeted to its lowest level in four years. Although the country continuously emphasizes opening up to attract foreign capital, it is interpreted that the slowdown in medium- to long-term economic growth momentum and geopolitical uncertainties such as supply chain conflicts with the United States have had an impact.

According to the announcement by China's Ministry of Commerce on the 21st, the cumulative foreign direct investment (FDI) in China from January to November this year amounted to 1.0403 trillion yuan (approximately 189.26 trillion KRW), a 10% decrease compared to the previous year. This is a further deterioration compared to the year-on-year decline (-9.4%) in cumulative investment up to October.

[Image source= Xinhua News Agency]

The Ministry of Commerce does not release monthly figures related to FDI but only discloses cumulative totals. Based on this, Bloomberg estimated that the actual new foreign capital utilized in China last month was 53.3 billion yuan, a sharp drop of 19.5% compared to the previous year. This is the lowest level since February 2020 (about 46.8 billion yuan), the early stage of the COVID-19 outbreak.

The cumulative decrease has been negative for six consecutive months since June. In particular, the decline rate increased from -2.70% in June to -4.0% in July, -5.10% in August, -8.40% in September, and -9.4% in October, expanding to double digits last month.

By industry, investment in the service sector was 708.7 billion yuan, down 15.9% year-on-year. The manufacturing sector recorded 294.17 billion yuan, a 2.1% decrease. However, investment in advanced manufacturing industries increased by 1.8%, and investments in medical device manufacturing and telecommunications equipment manufacturing rose by 27.6% and 5.5%, respectively. Construction investment also increased by 32.8%.

By country, investment from the United Kingdom (93.9%), France (93.2%), the Netherlands (34.1%), Switzerland (23.3%), and Australia (14.3%) showed remarkable growth. According to the Ministry of Commerce, the number of newly established foreign-invested enterprises reached 48,078 from the beginning of this year to November, a 36.2% increase compared to last year.

Bloomberg reported, "Despite China reopening its borders, the investment sentiment of foreign investors has weakened," adding, "Some foreign business leaders have returned to China, but very few companies have actually stepped up to invest more." Economists at Bank of America (BoA) elaborated, "The global macroeconomic environment, including the rising value of the dollar, slowing growth momentum in emerging markets, and increasing geopolitical uncertainties, will not be conducive to cross-border investment, especially in emerging markets."

Investment in China by Wall Street is also gradually shrinking. According to investment information firm Preqin, large private equity firms on Wall Street have raised $100 billion annually for China investment funds, but the amount raised from the beginning of this year to November is only $4.35 billion.

This content was produced with the assistance of AI translation services.