China’s Ministry of Commerce released the latest statistics on August 21, showing that the actual use of foreign direct investment (FDI) in China from January to July 2026 amounted to 438.33 billion yuan, a 6.2% decrease compared to the previous year. Official data from the Chinese Communist Party indicates that the scale of actual foreign investment in China has been declining overall since 2023.
In terms of industry structure, foreign investment in the manufacturing sector for the first seven months of this year amounted to 109.43 billion yuan, while the service sector received 319.95 billion yuan.
Of particular note is that the Ministry of Commerce’s data shows that actual foreign investment in high-tech industries reached 182.31 billion yuan, a 32.7% year-on-year increase. However, market analysts point out that this significant growth is largely due to a low base effect. After experiencing significant declines of 32.3% and 15.6% in 2024 and 2025 respectively, the rebound in foreign investment in high-tech industries this year mainly reflects a recovery following a bottoming out of the data.
When compared with long-term data, China’s actual use of foreign investment has been slowing down since reaching a peak in 2023 (766.71 billion yuan). The year-on-year decrease in 2023 was 8.0%, and further declines of 27.1% and 9.5% were recorded in 2024 and 2025. The cumulative amount has now dropped to near recent lows.
The slowing trend of foreign investment is also reflected in the private equity (PE) market. According to statistics from a global investment banking transactions and venture capital database, in the first half of 2026, 10 major global private equity firms did not make any publicly disclosed new equity investments in the Chinese market. This stark contrast with the situation a few years ago when China was still a significant destination for major PE institutions worldwide.
The Financial Times also reported that in recent years, global major PE institutions have faced difficulties in exiting investments in China, including restrictions in the IPO and M&A markets, declining valuations, and regulatory uncertainties, all of which may affect their willingness to make new investments.
This indicates that top international private equity funds are becoming increasingly cautious in their allocation strategies for the Chinese market, with new investment activities largely in a state of observation or stagnation.
Regarding country-specific statistics, the Ministry of Commerce noted that in the first seven months of this year, investment from Saudi Arabia, France, and South Korea in China showed higher year-on-year growth rates. However, the official data specifically mentioned that this statistic “includes data on investments through free trade zones.” This implies that the related funds might include investments transshipped through third-party free trade zones, and may not entirely represent direct capital inflows from these countries.
Moreover, the international market has long held doubts about the accuracy and statistical methodology of China’s foreign investment data. A report by the Congressional Research Service (CRS) in the United States has pointed out that some Chinese companies often use offshore holding companies and offshore tools to structure investments, with arrangements such as “round-tripping” (i.e., domestic funds flowing to overseas preferential tax areas and then returning under the guise of foreign investment to take advantage of foreign investment incentives), fund transshipment, and indirect shareholding, all of which may increase the difficulty of tracking and differentiating the sources and ultimate destinations of investments.
The CRS also stated that China’s use of domestic financing and special purpose investment tools makes tracking outbound Chinese activities even more complex.
Therefore, when analyzing China’s official foreign investment data, in addition to observing changes in the total amount, it is also necessary to pay attention to factors such as the actual source of funds, the ultimate investment destination, and statistical methods.