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China FDI falls to new low

Greenfield foreign direct investment (FDI) into China has fallen to a new record low in the first half of 2022 amid geopolitical tensions, draconian zero-Covid measures and the country’s structural transition to an economy driven by domestic demand.

Foreign investors in China have announced 110 projects worth $6.2bn in the first six months of the year, which stands at about half the level of investment recorded in the first half of 2021 and 2020, both in terms of project numbers and estimated capital expenditure, according to figures from foreign investment database fDi Markets.

The contrast is even more obvious when compared with with the pre-Covid years. Across the 2010s, China attracted on average 474 projects worth $35.3bn in the first half of the year, fDi Markets figures show.

The pandemic has been a wake-up call for investors in China.

“The Covid-19 lockdowns have generated a new form of unpredictability for foreign companies doing business in China”, Jörg Wuttke, the president of the EU Chamber of Commerce in China told fDi in May. “For the first time, multinationals are looking at how predictable China is and how secure their investments are there."

US president Joe Biden’s administration is also putting increased pressure on companies trading and investing in China. Among others, the Chips act approved in July offers incentives to semiconductor companies manufacturing in the US, provided they do not engage in “the material expansion of semiconductor manufacturing capacity in the People’s Republic of China or any other foreign country of concern”. Other such countries include North Korea, Iran and Russia.

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