China's FDI up 8% in 2022

China's inbound foreign direct investment (FDI) grew for a third consecutive year in 2022, indicating that the country remains a magnet for foreign investment despite the pandemic. The attraction of China, backed up by a mass consumption market, a strong manufacturing base and an improving business environment, was not dampened by Covid-19, Chinese observers said, and many foreign-funded firms will remain in the market for the long run. FDI in 2022 hit USD189.13 billion, rising 8% in U.S. dollar terms and maintaining stable growth, data from the Ministry of Commerce (MOFCOM) showed. FDI totaled USD173.48 billion in 2021 and USD144.37 billion in 2020. FDI in the manufacturing sector was CNY323.7 billion, up 46.1% year-on-year. This segment accounted for 26.3% of total FDI, an increase of 7.8 percentage points from 2021. FDI in the high-tech sector was up 28.3%, accounting for 36.1% of the total -- an increase of 7.1 percentage points from 2021. Large projects each with contracted FDI of more than USD100 million received CNY653.47 billion, up 15.3%. Those projects accounted for 53% of China's actual use of foreign capital, providing important support for stabilizing foreign investment, MOFCOM said.

“The attraction of China's long-term advantages, including an improving business environment and market conditions, played an important role,” Li Yong, Deputy Chairman of the Expert Committee of the China Association of International Trade, told the Global Times. China has promoted high-standard opening-up. For example, the authorities canceled registration requirements for businesses engaged in foreign trade on December 30, 2022, following a revision of the Foreign Trade Law, MOFCOM said on January 3.

MOFCOM and the Ministry of Science and Technology pledged to encourage foreign investors to set up research and development (R&D) centers and continue to support cross-border flows of R&D data in accordance with the law. “Foreign-invested R&D centers are important components of China’s science and technology innovation system,” the ministries said in a joint statement. Supporting the freer flow of R&D data may help alleviate foreign investors’ concerns over the country’s tightening cybersecurity regulations and limitations on data flows. China’s annual research and development expenditures nearly tripled in the past decade, reaching CNY2.8 trillion in 2021, and its spending is expected to have surpassed CNY3 trillion in 2022.

South Korea, Germany and the UK are the top three investors, with an increase of FDI of 64.2%, 52.9% and 40.7%, respectively. Vice Premier Liu He reiterated at the Davos World Economic Forum that China is determined to promote all-round opening-up and multilateral cooperation. “Foreign investments are welcome in China, and the door to China will only open up wider,” he said, as reported by the Global Times.