In January 2025, China’s actual absorption of foreign capital decreased by 13.4%, marking the worst start in four years. Due to the sluggish Chinese economy and deteriorating investment environment, global multinational companies are accelerating their withdrawal from China across sectors from high technology to manufacturing and finance.
According to a statement released by China’s Ministry of Commerce on Wednesday, January 2025 saw China’s actual use of foreign capital amounting to 97.59 billion yuan, a 13.4% decrease compared to the same period last year. This was lower than the 102.2 billion yuan recorded in January 2022 and the 127.6 billion yuan in January 2023, marking the worst start in the past four years.
Furthermore, in 2024, China’s actual use of foreign capital amounted to 826 billion yuan, showing a 27.1% decrease, reaching the lowest level since 2016.
At the same time, there was a record outflow of foreign direct investment. Bloomberg cited estimates from China’s State Administration of Foreign Exchange, indicating that in 2024, China’s net outflow of foreign direct investment reached 1.227 trillion yuan (approximately 168.4 billion US dollars), setting a new historical high.
Recent reports from The Wall Street Journal show that an increasing number of Western technology companies are no longer satisfied with the “China Plus One” strategy but are instead adopting the “Anything But China” (ABC) strategy, accelerating the relocation of their supply chains away from China.
Analysis shows that at least twelve multinational high-tech companies exited or downsized their operations in China in 2023 and 2024. This included companies like IBM, Microsoft, Trend Micro, and Texas Instruments closing their research and development centers in China, as well as Fidelity International, Cisco, and Amazon conducting significant layoffs.
Moreover, in 2024, at least eleven multinational manufacturing companies exited or downsized their operations in China, such as Volkswagen, Toyota, Nissan, Honda, Bridgestone Corporation, and Nippon Steel Corporation withdrawing from joint ventures or closing wholly-owned factories.
Senior researcher Chi Hung Kwan from Nomura Capital Market Research Institute in Japan analyzed that the reasons behind foreign companies leaving China include changes in the investment environment, such as escalating US-China tensions, slowing Chinese economic growth, rising production costs in China, increased security regulations by the Chinese government, intense competition from local Chinese firms, restructuring of global supply chains, and heightened anti-China sentiment in the country.
Not only in high technology and manufacturing sectors, but foreign financial institutions in China have also begun downsizing and laying off employees.
Bloomberg reported recently that Wall Street investment banks are facing a double blow in China due to the sluggish economy suppressing trading volumes and increasing restrictions imposed by the US on investments in China. With both the US and China imposing new tariffs, the future is expected to become even more challenging.
Signs of retreat from Wall Street investment banks in China have been increasing over the past two years. After several rounds of downsizing, some of the world’s largest banks have streamlined their teams to meet the minimum requirements set by Chinese regulators, with comprehensive risks involving loans, transactions, and investments in China reduced by one-fifth.
The number of Goldman Sachs employees in China has decreased by 15% since its peak in 2022, with a significant drop in trading volume. Public data shows that Goldman Sachs has only made $67 million in profits in China over the past five years. Many analysts believe that for a bank of Goldman Sachs’ scale, this figure is merely a rounding error.
According to sources quoted in the report, the number of employees in UBS’s investment banking business in China has halved since 2019, dropping to around 50 by the end of last year. JPMorgan Chase is even preparing for the worst. If the US were to impose comprehensive sanctions similar to those against Russia, the bank would exit China.
In 2024, Morgan Stanley conducted the largest layoffs in many years in both mainland China and Hong Kong. The bank opted not to establish onshore brokerage business in mainland China but chose to handle most of its China market brokerage and advisory business in Hong Kong.
Additionally, Citibank has exited its onshore consumer wealth management business, part of its broader shrinking of consumer businesses in Asia and Europe.
This downturn contrasts sharply with the optimism of a few years ago when JPMorgan CEO Damon expressed the company’s commitment to fully penetrate the Chinese market, and Goldman Sachs envisioned doubling its workforce under the most optimistic circumstances.