China’s FDI Trends 2024: Key Sources, Destinations, and Sectors

• China’s FDI trends and statistics for 2023-24 were published by the Ministry of Commerce (MOFCOM). Despite a decline in total investment, China maintains a 12.3 percent share of global cross-border direct investment in 2023, marking over 10 percent for the fourth consecutive year.
• Asian countries were the largest investors in China, while notable contributions from European and North American nations underscored a diversification of FDI sources. The tertiary industry dominates the landscape, with high-tech services alone drawing US$428.8 billion, underscoring China’s strategic emphasis on innovation-driven growth.
• The Chinese government has been ramping up efforts to attract more foreign investment. Recent regulatory changes aim to facilitate greater access to high-quality foreign capital and reduce entry barriers for foreign strategic investors, signaling a commitment to improving the investment climate.

China, recognized as one of the world’s leading destinations for foreign direct investment (FDI), has experienced notable shifts in its investment landscape over the past few years.

Despite a challenging environment, including a significant downturn in 2023, where FDI inflows fell by 13.7 percent to US$163 billion following a 4.5 percent growth in 2022, China remains resilient in attracting foreign capital. This decline was attributed to several factors, including an uneven post-COVID economic recovery, ongoing geopolitical tensions, regulatory uncertainties, and stringent capital control measures.

According to the recently released Statistical Bulletin of FDI in China 2024, China’s FDI scale remained stable in 2023, with a 12.3 percent share of global cross-border direct investment, marking the fourth consecutive year exceeding 10 percent.

The Chinese government has taken significant steps to enhance the investment climate, removing foreign investment access barriers, implementing tax incentives, supporting foreign-invested R&D centers, and introducing regulatory reforms to facilitate cross-border data transfers. Recent reports highlight key characteristics of foreign investment in China, including a rise in newly established enterprises, steady growth in high-tech industries, and strong attraction to key open platforms, which are indicative of a robust investment environment.

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Encouragingly, the first nine months of 2024 have demonstrated signs of recovery, with China attracting RMB 640.6 billion (US$90.26 billion) in foreign investment. Notably, there has been an 11.4 percent increase in new foreign-invested enterprises (FIEs), with high-tech manufacturing, medical equipment, and professional technical services experiencing substantial growth in foreign capital utilization.

These trends signal a shift towards innovation and services, underscoring ongoing investor interest in China’s dynamic market.

In this article, we explore the key trends and government initiatives shaping China’s FDI landscape, providing insights for businesses seeking to navigate and capitalize on opportunities in the world’s second-largest economy.

Overview of China’s FDI trends in 2023

In 2023, China’s FDI landscape demonstrated a strong concentration across various industries, underscoring the country’s continued appeal to international investors. The primary sectors attracting foreign capital included:

• Manufacturing
• Scientific Research and Technical Services
• Leasing and Business Services
• Information Transmission, Software, and IT Services
• Real Estate
• Wholesale and Retail
• Finance

Together, these seven sectors accounted for 86.8 percent of all newly established FIEs, as well as 89.5 percent of the actual utilized foreign investment.

Specifically, the high-tech industry emerged as a significant growth area, with 13,758 new FIEs established in 2023, attracting a total of US$60.98 billion in foreign capital. Within this sector, high-tech manufacturing saw the creation of 841 new enterprises with an actual investment of US$18.1 billion, while high-tech services led the way with 12,917 new enterprises and US$42.88 billion in foreign capital utilization.

Regarding the sources of FDI, Asian countries dominated foreign investment activity in China, accounting for 76.8 percent of newly established FIEs and 81.3 percent of the total actual investment amount. In contrast, African countries contributed only 5.8 percent of new enterprises and a mere 0.2 percent of the investment, while European nations represented 7.2 percent of new establishments with 8.9 percent of the investment. Latin American countries made up 1.4 percent of the new enterprises and 6.4 percent of the investment, whereas North American countries accounted for 5.5 percent and 2.4 percent, respectively.

By the end of 2023, the top 15 countries and regions investing in China had established a total of 1.034 million FIEs, representing 87.6 percent of all FIEs in the country. The cumulative investment from these nations reached US$2.7 trillion, accounting for an impressive 94.2 percent of China’s total utilized foreign capital.

Key sources of FDI into China

FDI sources by region

In 2023, the regional distribution of FDI into China underscored Asia’s continued dominance, with 76.8 percent of new FIEs and 81.3 percent of total realized FDI coming from the region. This trend reflects China’s deep economic integration with its neighboring countries, particularly through strong ties with Hong Kong, Japan, South Korea, and Singapore.

Europe accounted for 7.2 percent of new FIEs and 8.9 percent of realized FDI, while North America contributed 5.5 percent of FIEs and 2.4 percent of FDI, indicating a modest yet stable engagement.

Latin America and Oceania made smaller contributions, with realized FDI shares of 6.4 percent and 0.9 percent, respectively.

Africa, despite establishing 5.8 percent of new FIEs, contributed a mere 0.2 percent to realized FDI, highlighting a significant disparity between enterprise establishment and investment value.

Top 15 FDI sources by country in 2023

In 2023, the landscape of FDI in China continued to be heavily influenced by the top 15 investing countries, which collectively established new 39,453 FIEs. This impressive figure accounted for a remarkable 73.4 percent of all new FIEs in the country.

Among these, Hong Kong emerged as the leading source, contributing 21,057 FIEs—39.2  percent of the total—and an impressive US$111.12 billion in realized FDI, representing 68.1 percent of the national total.

The British Virgin Islands followed with a much smaller number of new enterprises, with 203 FIEs.  but still played a crucial role in financial inflows, bringing in US$6.86 billion. Other notable contributors included Japan and South Korea, which established 888 and 1,828 FIEs, respectively, underscoring the significance of East Asian economies in shaping China’s investment environment.

The top 15 countries also reflected a diverse range of economic ties. Despite geopolitical challenges, the United States accounted for 1,920 newly established FIEs and contributed US$3.36 billion in realized FDI.

European countries, including the Netherlands, the United Kingdom, and Germany, showcased a growing influence, particularly in terms of financial contributions relative to their numbers of FIEs. For instance, the Netherlands, with only 183 FIEs, significantly impacted the realized FDI with US$5.36 billion.

Comparative analysis: 2023 vs. 2022

The 2023 data shows continuity in Asia’s lead but a slight decrease in its share of realized FDI from 86.5 percent in 2022 to 81.3 percent. North America’s increased share of realized FDI, rising from 1.5 percent to 2.4 percent, suggests a subtle shift towards more robust engagement, possibly driven by specific strategic sectors. Europe’s share of realized FDI also rose from 6.3 percent to 8.9 percent, indicating a growing diversification in China’s FDI sources. The steady contribution from Latin America, coupled with a rise in its share of realized FDI from 4.9 percent to 6.4 percent, points to its increasing relevance in China’s broader investment strategy.

Overall, while Asia continues to dominate, the slight shifts in FDI shares from Europe and North America reflect evolving global investment dynamics and China’s ongoing efforts to diversify its sources of foreign capital.

In terms of specific countries or regions, Hong Kong maintains its position as the top source of FDI in both 2022 and 2023, reflecting its ongoing significance in the investment ecosystem.

The British Virgin Islands emerged as a rising star, moving up one spot to second place, which indicates a strengthening role in financial inflows. Similarly, Japan climbed two positions to third, showcasing an increased interest in investing in China. These shifts highlight the growing confidence of these regions in the Chinese market.

Conversely, some contributors experienced declines. Singapore dropped three positions to fifth, suggesting a decrease in its relative investment activity, while Germany fell four spots to 11th, indicating a significant reduction in its investment contributions. Additionally, Macao saw a notable decline, dropping four positions to 15th, which may reflect changing investment dynamics in the region.

Mixed trends were evident among other countries as well. The United Kingdom and the United Arab Emirates improved their rankings, reflecting a resurgence in their investment activities, while the United States experienced a slight decline, which may be influenced by broader geopolitical factors.

Top 15 FDI Sources of China as of 2023

Source: China’s Ministry of Commerce FDI Statistics 2024

Top FDI destinations within China

In 2023, China’s FDI was heavily concentrated in the eastern region, which accounted for 87.6 percent of new FIEs and 87.1 percent of actual utilized foreign capital. This concentration reflects the region’s economic advantages, including advanced infrastructure, established industrial bases, and proximity to major international markets.

The eastern provinces, particularly economic powerhouses like Guangdong, Shanghai, and Zhejiang, benefit from better access to resources, skilled labor, and government support, making them attractive to foreign investors.

In contrast, the central and western regions accounted for a smaller share of FDI, with 5.6 percent and 6.8 percent of new enterprises, respectively. The central region’s developing infrastructure and growing industries are starting to draw more attention, while the western region, despite its rich natural resources and potential for growth, still faces challenges such as less developed infrastructure and fewer direct links to global markets.

• Eastern part: Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Hainan.
• Central part: Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan.
• Western part: Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Xizang, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang.

Province-by-province breakdown

In 2023, the top 10 provinces in China attracting FDI were Guangdong, Shanghai, Jiangsu, Zhejiang, Shandong, Beijing, Fujian, Sichuan, Hainan, and Tianjin. Together, these provinces accounted for 87.4 percent of all new FIEs and 86.2 percent of the actual utilized foreign capital.

Guangdong led the charge, hosting the highest number of new enterprises due to its well-established industrial base, strategic location near Hong Kong, and its role as a key hub in global supply chains. Shanghai and Jiangsu also attracted significant FDI, driven by their advanced infrastructure, vibrant economic zones, and business-friendly policies.

Zhejiang, Shandong, and Beijing further highlight the importance of economic diversity and regional strengths. Zhejiang, with its strong manufacturing and export-oriented economy, and Shandong, known for its heavy industries and agriculture, provided unique opportunities for foreign investors.

Beijing, as the political and cultural capital, offered advantages in sectors like technology, finance, and professional services.

FDI in China’s super city clusters

The Yangtze River Economic Belt was the leading performer, contributing 34 percent of new FIEs and a substantial 50.9 percent of the realized FDI value. This region includes major cities like Shanghai, Wuhan, and Nanjing, which are characterized by a dynamic economy and extensive transportation networks. The Yangtze River serves as a crucial trade artery, facilitating the movement of goods and services. Its focus on innovation, manufacturing, and logistics has made it a magnet for foreign investors looking to access China’s vast market.

The Beijing-Tianjin-Hebei region accounted for 5.3 percent of newly established FIEs and 13 percent of the realized FDI value. This region is notable for its strong economic infrastructure and proximity to Beijing, the capital of China. The presence of many multinational corporations and a skilled workforce make it an attractive destination for foreign investment, particularly in technology, finance, and services.

The Northeast region accounted for 1.8 percent of new FIEs and 2.6 percent of the realized FDI value. Historically known as China’s industrial heartland, this region includes Heilongjiang, Jilin, and Liaoning. Although it has faced economic challenges in recent years, efforts are underway to revitalize its industries and attract new investments. The government is focusing on modernizing infrastructure and promoting high-tech industries to enhance the region’s competitiveness and appeal to foreign investors.

FDI distribution by industries and sectors

By industry

In 2023, FDI in China demonstrated a strong sectoral concentration, with the tertiary industry dominating the landscape. Newly established FIEs in the tertiary sector accounted for a remarkable 90.3 percent of the total, while the secondary and primary industries contributed 9.1 percent and 0.6 percent, respectively.

This pattern was mirrored in actual FDI utilization, with the tertiary industry attracting 64.4 percent of the total FDI, the secondary industry 35.2 percent, and the primary industry a mere 0.4 percent.

This distribution highlights the increasing importance of service-oriented industries in China’s economic evolution.

By sector

Key sectors attracting FDI in 2023 included:

• Manufacturing;
• Leasing and business services;
• Scientific research and technology services;
• Information transmission;
• Software and IT services;
• Wholesale and retail;
• Real estate; and
• Finance

Notably, high-tech industries were a major focus, with 13,758 new FIEs and a realized FDI value of US$61 million in this sector. Among them, high-tech services alone drew US$42.9 million, underscoring China’s strategic emphasis on innovation-driven growth and the transition from traditional manufacturing to high-value services.

Indeed, the focus on high-tech industries reflects China’s push for high-quality industrial development. High-tech manufacturing attracted US$181 billion, emphasizing the country’s drive towards advanced sectors like pharmaceuticals, electronic information, and automotive manufacturing.

Simultaneously, there was a notable surge in productive service industries, including financial services and R&D, aligning with China’s broader goals of modernizing its economy and fostering sustainable, innovation-led growth.

This trend is reinforced by policies under the 14th Five-Year Plan, which aims to open up sectors like telecommunications and culture, paving the way for a more service-oriented economy.

FDI by Sectors in 2023

Source: China’s Ministry of Commerce FDI Statistics 2024

China’s FDI trends and outlook in 2024

According to recent statistics from the Ministry of Commerce, China attracted a total of RMB 640.6 billion in foreign investment from January to September 2024, despite a year-on-year decrease of 30.4 percent in actual capital utilization. During this period, the country established 42,108 new foreign-invested enterprises, reflecting an 11.4 percent increase compared to the previous year. This growth in new enterprises suggests a continued interest among foreign investors in entering the Chinese market.

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When breaking down foreign investment by industry, the service sector emerged as the most significant recipient, utilizing RMB 446.13 billion (US$62.78 billion), while the manufacturing sector attracted US$179.24 billion (US$25.22 billion). Notably, high-tech manufacturing showed resilience, with foreign capital usage reaching RMB 77.12 (US$10.82 billion), accounting for 12 percent of the national total—a 1.5 percentage point increase from the same period in the previous year.

Specific industries within the manufacturing sector demonstrated remarkable growth in foreign capital utilization. The medical equipment and instrument manufacturing industry saw an impressive 57.3 percent increase, while the professional technical services and computer and office equipment manufacturing industries experienced growth rates of 35.3 percent and 29.2 percent, respectively. These trends indicate a strong demand for innovative technologies and specialized services, aligning with China’s goals to advance its technological capabilities and support high-value sectors.

In terms of foreign investment sources, countries such as Germany and Singapore reported significant growth in their investments in China, increasing by 19.3 percent and 11.6 percent, respectively, which includes figures from free port investments. This highlights a favorable shift in the investment landscape as foreign investors continue to seek opportunities in the Chinese market despite the overall decline in total capital utilization.

As China navigates through a complex global economic environment, these developments in FDI reflect a mixed but promising outlook for 2024, characterized by a growing number of foreign enterprises and targeted investments in high-tech and service sectors. This positioning underscores China’s ongoing efforts to attract foreign capital while simultaneously advancing its industrial and technological transformation.

What is China doing to attract more foreign investment?

The Chinese government has taken decisive steps in its policy landscape aimed at fostering a more attractive foreign investment environment and strengthening its regulatory framework. These developments, highlighting the country’s strategic initiatives to encourage international capital inflow while addressing critical security concerns, include:

• Expansion of foreign investment access: China’s State Council has approved the 2024 Negative List for Foreign Investment Access, marking a significant shift in the country’s approach to foreign investment. Restrictions on foreign ownership in the manufacturing sector have been completely lifted, while access to telecommunications, education, and healthcare services has been further opened. In a strategic move, China has also launched a pilot program allowing 100 percent foreign ownership of data centers and value-added telecom services in major cities like Beijing, Shanghai, Hainan, and Shenzhen, creating new opportunities in the tech sector for multinational companies. This pilot has already attracted interest from over 10 foreign corporations, including Tesla and Apple. Additionally, foreign investment limits are being eased in advanced healthcare fields, permitting foreign ownership in cell and gene therapy as well as wholly foreign-owned hospitals in select cities.
• Enhanced foreign investment guidelines: The State Council unveiled a comprehensive set of guidelines designed to improve the overall foreign investment climate. These guidelines focus on creating more favorable conditions for foreign businesses, aiming to attract increased foreign capital and enhance the country’s economic competitiveness.
• Extension of tax incentives: The Ministry of Finance, in collaboration with the State Administration of Taxation, announced the extension of existing tax holidays for foreign investors until the end of 2027. This initiative aims to incentivize long-term commitments from foreign enterprises, demonstrating China’s intention to maintain a welcoming environment for international investments.
• Promotion of foreign Investment in R&D: The State Council introduced measures to encourage the establishment of foreign-invested R&D centers. This initiative underscores China’s commitment to fostering innovation and technological advancement, positioning the country as a competitive hub for global research and development activities.
• Facilitation of cross-border data flow: China has introduced several regulatory updates to streamline cross-border data transfers and clarify cybersecurity compliance. Key changes include new data export regulations from the cybersecurity regulator, which raise thresholds for personal information volumes before compliance procedures are triggered and provide clearer guidelines for handling “important” data. Specific areas, such as the Tianjin Free Trade Zone and Lingang New Area in Shanghai, have established data “Negative Lists” and trial data lists to simplify export procedures and reduce regulatory burdens for companies in sectors like automotive, biopharmaceuticals, and mutual funds. Additionally, new rules for companies handling “core” and “important” data in industrial and IT sectors specify the scope and procedures for mandatory data security assessments. Further regulations strengthen data protection requirements, expanding responsibilities for personal information handling, data transfer, and network security across Internet platforms. These measures aim to ease cybersecurity compliance while reinforcing data protection standards for businesses.
• Relaxing rules on foreign strategic investment in listed companies: On November 4, 2024, China announced revised regulations for foreign strategic investments in publicly listed companies to attract high-quality foreign capital amid economic and geopolitical challenges. Effective December 2, the new rules lower entry barriers by reducing the minimum shareholding threshold for foreign investors from 10 percent to as low as 5 percent and easing eligibility criteria from US$100 million to US$50 million in overseas assets or US$500 million to US$300 million in assets under management. Additionally, the share lock-up period has been reduced from three years to one, enhancing liquidity, and foreign investors can now use tender offers and shares in unlisted overseas companies for strategic investments. These changes reflect China’s commitment to a more open investment environment to drive economic growth and innovation.

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