The official data from the Chinese Communist Party (CCP) shows that in the first three quarters of 2025, the number of newly established foreign-invested enterprises increased by over 16%, but the actual utilization of foreign capital decreased by more than 10%. The authorities claim a “resurgence of foreign investment,” however, experts point out that these numbers reflect a phase where foreign investment is moving towards risk aversion due to the challenging investment environment and capital outflows.
According to a report released by the CCP’s Ministry of Commerce on October 25, by the end of September this year, there were 48,921 newly established foreign-invested enterprises nationwide, marking a 16.2% increase from the same period last year. However, the actual utilization of foreign capital during this period was 573.75 billion RMB, a decrease of 10.4% from the previous year. The official media described this change as a “renewed confidence in foreign capital,” sparking doubts about the true situation of attracting foreign investment in China.
Chinese issues expert Wang He explained to reporters that there is a structural issue in the CCP’s foreign investment statistics. He mentioned that while the number of foreign-invested enterprises is increasing, the actual amount of foreign capital being used is decreasing, indicating a trend towards smaller-scale foreign investment.
Previously, foreign investment in China often amounted to tens or hundreds of billions, but now it mostly consists of small-scale investments by medium and small enterprises.
The report states that in 2024, foreign investment in China saw a 27.1% decrease, the largest drop since 2008. The current data reveals a continuous decrease in foreign investment.
Why is there an increase in the number of foreign-invested enterprises but a decrease in the actual utilization of foreign capital? Yin Min (pseudonym), a Beijing investment consultant, explained to Dajiyuan that the rise in the number of new foreign-invested enterprises is mainly due to the lower registration threshold. Some companies have registered capital as low as tens of thousands of RMB, far below the previously large-scale investments in the manufacturing industry.
He emphasized, “The increase in quantity does not explain the problem; it is the decrease in the amount of capital that indicates economic issues.”
Zhao Jianmin (pseudonym), a scholar from Shanxi, added, “The current registration process for foreign investment is fast, and companies may register first to retain market options but may not necessarily invest capital. While this behavior is counted as new foreign enterprises in statistics, it does not reflect the actual flow of investment.”
Wang He further pointed out that there is a significant amount of “pseudo-foreign investment” in the CCP’s disclosed foreign investment data. “About 70% of China’s foreign investment is made through Hong Kong, and at least 40% of the investment from Hong Kong is ‘pseudo-foreign investment.'”
He explained that these pseudo-foreign investments are Chinese companies registered overseas returning to invest in China, and if this portion is excluded, the actual scale of foreign investment will be much lower than the official statistics suggest.
According to a recent report from the CCP’s State Administration of Foreign Exchange, in the first half of 2025, foreign direct investment in China was only 31.9 billion USD, while China’s outbound direct investment reached a high of 78.5 billion USD, resulting in a net outflow of 46.6 billion USD.
Wang He stated, “This indicates that funds are not flowing in but are instead being withdrawn, with a significant amount of capital flowing out of China.” He emphasized that this phenomenon sharply contrasts with the Commerce Ministry’s claim of a “resurgence of foreign investment.”
Regarding the CCP’s official narrative of a “returning confidence” in foreign capital, American economist David Huang told Dajiyuan that it actually signifies foreign capital entering a “defense phase.” “Projects are increasing while money is decreasing. This is not a revival, but a stage where foreign investment is transitioning towards a light asset and fragmented defense strategy.”
The US-China Business Council (USCBC), representing over 270 American member companies in China, released its “Business Environment Survey 2025” at the end of September. The survey indicated a decrease in the proportion of members planning to increase investment in China, with most companies focusing on their existing operations.
The report also mentioned that, although 82% of businesses in China are still profitable, expectations for growth and profit are weakening. “The percentage of businesses reporting losses in the past three years is significantly higher than levels from 2016 to 2022.”
David Huang believes that foreign investment behavior has shifted from profit-seeking to risk aversion, describing this trend as a “structural trust gap.” “Foreign investors are no longer willing to bet on the future nor expand their operations.”
He bluntly stated that these foreign enterprises are not being “attracted” by the Chinese market but rather “stuck” due to geopolitical structures.
Wang He expressed pessimism, saying that the data on American company profitability is from 2024, and significant changes have occurred this year. For example, due to policy changes, Nvidia, a company that sells high-end chips, has no longer generated revenue in China and is nearly withdrawing from the Chinese market.
Data from the United Nations Conference on Trade and Development indicates that global foreign direct investment (FDI) increased by 3% in 2024, but China experienced a nearly 30% decline, the largest among major economies.
The EU Chamber of Commerce in China released its “Business Confidence Survey 2025” on July 25, showing that 73% of European companies in China find doing business in China increasingly challenging, with the proportion reaching a historical high. Among them, 71% listed the slowing Chinese economy as their primary challenge, and only 38% of companies achieved revenue growth in 2024, marking a historic low record.
The United States Department of State released the “2025 China Investment Environment Report” on September 26, criticizing Beijing for verbally committing to market openness while still maintaining restrictive conditions, including equity caps, technology transfer requirements, and localized research and development obligations. “Even in supposedly open sectors, foreign companies still face opaque and politicized approval processes.”
The United States Trade Representative (USTR) included China in the “Priority Watch List” of the “Special 301 Report” in 2025, citing severe flaws in its intellectual property rights system.
The report also mentioned that following the revision of the “Counter-Espionage Law” by the CCP, foreign-invested enterprises and consulting firms have been raided multiple times, and employees have been detained on vague charges, causing panic among companies.
In a report released by the Organisation for Economic Co-operation and Development (OECD) in December 2024, China remains one of the most closed countries among major economies. According to an assessment by the Atlantic Council, China ranks lowest in terms of openness to foreign direct investment among major economies.
David Huang summarized that behind the CCP’s claim of a “returning confidence” in foreign capital lies the stark reality of the foreign investment environment.
He warned that “while the number of foreign enterprises is increasing, the quality is decreasing.” If the Beijing authorities fail to initiate institutional reforms and restore trust, foreign capital will continue to “lurk” and maintain market access with the lowest risk possible.