China: FDI inward flows 2022

In 2022, the value of foreign direct investment (FDI) inflows to China reached approximately 189 billion U.S. dollars. This was an increase of around 4.5 percent compared to the previous year.

FDI development in China

China was the second largest recipient of FDI inflows worldwide in 2022 and has been an attractive destination for foreign investment since it opened-up four decades ago. Annual FDI inflows increased rapidly from around 40 billion U.S. dollars in 2000 to 124 billion in 2011, but growth rates have dropped thereafter. This was mainly due to high market restrictions and growing competition from domestic companies. In order to improve the investment environment, the Chinese government issued a new Foreign Investment Law in 2019 and took further measures to safeguard the interests of foreign investors. These measures were at least partly responsible for increased FDI inflows in 2020 and 2021. However, geopolitical tensions and questions over China’s intentions to further open-up its economy render future developments in this area highly uncertain.

Investor origins and preferred industries

According to UNCTAD estimates, around 10.4 percent of investment stock in 2020 originated from the United States, followed by Japan, the United Kingdom, and Germany. However, the picture is blurred by the fact that a large portion of these investments entered China through international financial hubs such as Hong Kong, which officially accounted for 53 percent of the Chinese FDI stock in 2020. In terms of invested sectors, FDI distribution has changed a lot over the last 20 years. While manufacturing received around 60 percent of annual investments in 2005, that share has dropped to around 22 percent in 2020. Today, more than 70 percent of the investment value is directed into the service sector.