It’s a drag on business, but it’s not gonna shut anything down
“Companies are separating their China operations so they function in more of a silo. Nobody is happy about this, but it’s the reality of the new working model,” said Gibbs, who is now an executive-in-residence at the University of San Francisco’s China Business Studies Initiative.
“It slows down investment. It reduces enthusiasm for investment. It’s a drag on business, but it’s not gonna shut anything down. It won’t cause them to withdraw from China. But it’s a drag on business.”
While the FDI change from the first quarter was a 41.7 per cent increase over the last quarter of 2023, the data for March showed slower growth compared to the first two months of the year.
New actual utilised foreign investment into China in March was 87 billion yuan, a deceleration from 113 billion yuan in January and 102 billion yuan in February.
The March data was also a 38 per cent drop compared to the same month in 2023, according to the Ministry of Commerce.
The ministry, which has not published FDI figures in US dollar terms since last year, said the first quarter decline was due to a high baseline from the same period in 2023.
The ministry added that 12,086 new foreign-invested firms were set up across the country from January to March, a 20.7 per cent increase compared with the same period last year.
Joerg Wuttke, president emeritus of the European Union Chamber of Commerce in China, said while the size of the Chinese economy remains a reason for many foreign investors to stay, their “appetite” for investing in China has been slow to come back.
“China has a real problem of having international participants in this economy. And the problem has to do with the fact that they are also still emphasising self-reliance in some business segments,” Wuttke said.
Traditional areas have reached saturation for both private and foreign investors. We should think about how to open up new industries for their investments
For example, he added, the automotive, machinery and chemical industries are areas where China wants foreign investment, while tech-related companies have a hard time in the Chinese market.
Zheng Yongnian, a prominent political economist and a long-time adviser to the Chinese government, had similar opinions, saying the next step for China to boost investment would be identifying new industries in which foreign companies could take part.
China’s slowing economy and geopolitical tensions have been frequently cited as reasons foreign investors have remained wary of a full-scale return.
A survey from the American Chamber of Commerce published in February this year showed nearly half of all respondents had no plans to expand their investment in the country, even as some grew optimistic about stabilising US-China ties.