China investment slump prompts new effort to woo foreign firms
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Foreign firms channelled a net US$4.5 billion (S$6 billion) into China in 2024, the lowest amount since 1992.
PHOTO: BLOOMBERG
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BEIJING - China is renewing its efforts to attract foreign businesses, pledging more engagement and unveiling an action plan to ease restrictions after inbound investment tumbled in 2024 to its lowest in more than three decades.
The Commerce Ministry will visit foreign enterprises to better understand their needs and find solutions to their problems, Vice-Minister Ling Ji said at a briefing on Feb 20.
If certain issues cannot be immediately resolved, the ministry will coordinate with the local authorities to ensure proper follow-up and resolution, Mr Ling added.
The plan released by the Commerce Ministry on Feb 19 is looking to stabilise foreign investment by vowing to remove all market access restrictions in the manufacturing sector, ensure equal treatment of goods produced by both local and foreign companies, and improve access to credit.
It is the latest in the central government’s ongoing efforts to reverse the investment slump since the Covid-19 pandemic, following a similar initiative announced in 2023.
Despite these measures, foreign companies have continued to scale back new investments in China.
In 2024, they channelled a net US$4.5 billion (S$6 billion) into the country, the lowest amount since 1992.
“Foreign investors need signs of something bolder,” said Mr Nick Marro, global trade lead and principal Asia economist at the Economist Intelligence Unit. “The continued roll-outs of pilot programmes and other kinds of regulatory tinkering at the margins aren’t going to be enough to restore confidence, particularly given persistent economic headwinds and darkening geopolitical storm clouds.”
Adjusted for the effect of companies repatriating profits from China, the picture improves somewhat, but still shows how corporate willingness to commit capital to China has weakened over the past few years.
Figures on investment into company equity showed about US$58 billion in new transactions in 2024, the lowest since 2004. This data includes both capital inflows and reinvestment of profit.
“Foreign firms are repatriating their China-derived earnings because of higher yields offshore,” Mr Marro said, adding that the worsening economic outlook in China is also making it harder to justify new spending. BLOOMBERG
