China FDI Contracts Least in 3 Years

Foreign direct investment into China fell by 5% annually in the first half of 2026, easing from the 8.6% decline in the first five months of the year. Despite extending three-year streak of year-to-date declines in FDI, it was the smallest since little after the streak began in July of 2026. It prolonged the rebound from the record-slump of -31.5% in August of 2024, when risks of a deflationary spiral and the peak of low consumer spending dented foreign investment demand. Still, opaque balance sheets and risks that protectionist policies may curb manufacturing exports continued to weigh on the Chinese economy.

Foreign direct investment inflows into China fell 10.3% year-on-year to CNY 287.7 billion in the first four months of 2026. Within the total, FDI in the manufacturing sector amounted to CNY 78.9 billion, while high-tech industries attracted CNY 166.3 billion, up 20.3% and accounting for 40.4% of total FDI. Meanwhile, the services sector received CNY 204.2 billion. Still, investment in R&D and design services, as well as in the manufacturing of computers and office equipment and electronic and communication equipment, increased by 108.4%, 22.9%, and 20.2%, respectively. During the period, 20,113 new foreign-invested enterprises were established in China, representing a 6.8% year-on-year increase. By source, investment flows into China grew significantly from Luxembourg (+110.3%), Switzerland (+60.8%), France (+58.3%), and the US (+24.5%).

Foreign direct investment inflows into China fell by 7.3% year-on-year to CNY 249.6 billion in the first quarter of 2026. Within this total, FDI in the manufacturing sector amounted to CNY 71.46 billion, while high-tech industries attracted CNY 102.73 billion and the services sector received CNY 174.6 billion. Notably, investment in R&D and design services, as well as in the manufacturing of computers and office equipment and electronic and communication equipment, increased by 127.8%, 88.1%, and 23.8%, respectively. In the first quarter of the year, 13,987 new foreign-invested enterprises were established in China, representing an 11% year-on-year increase. By source, investment flows into China rose significantly from Luxembourg (+96.8%), Switzerland (+50.4%), France (+42.3%), and South Korea (+35.2%).