In the midst of China’s deteriorating political and economic environment, foreign investment has been declining for 13 consecutive months. In the first half of this year, China’s actual use of foreign direct investment (FDI) dropped by 29.1% compared to the same period last year.
On July 12, data from the Chinese Ministry of Commerce revealed that the total amount of actual foreign investment used in the country in the first half of the year was 498.91 billion yuan (RMB), showing a 29.1% year-on-year decrease. This decline, exceeding the 28.2% decrease in the previous five months, continued the downward trend that began in June 2023.
Regarding the reasons for the continuous decline in foreign direct investment in China, Professor Sun Guoxiang from the International Affairs and Business Department of Nanhua University recently told Epoch Times that firstly, it is due to the continuous contraction of the domestic market in China. Secondly, it is related to the treatment of foreign companies by the Chinese Communist Party. Thirdly, there is a geopolitical and economic dimension, specifically concerning the issue of supply chain restructuring.
He mentioned that the Chinese Communist Party no longer has the capability to implement any policies to reverse the current economic downturn. “Currently, China’s economy is riddled with problems and must undergo comprehensive structural and institutional reforms in both the economic and political systems.”
On March 19, the State Council General Office of the Chinese Communist Party issued the “Action Plan for Greater Efforts to Attract and Utilize Foreign Capital,” proposing 24 measures in five areas, emphasizing the need to strengthen the confidence of foreign capital in developing in China. The plan includes reducing the negative list for foreign investment access, completely eliminating restrictions on foreign investment in manufacturing, and advancing openness in telecommunications and medical sectors.
This action plan also includes visa facilitation measures, with the validity period of visas for personnel of foreign investment enterprises and their family members extended to two years upon entry.
In response, Taiwanese economist and political commentator Huang Shicong previously told Epoch Times, “China’s investment environment cannot be improved simply by the so-called advantages of open markets.” He pointed out, “The key lies in the Chinese Communist Party’s attitude towards foreign capital. With so many foreign consulting companies being investigated and the deteriorating political situation between China and the United States, these are the major impediments to foreign investment in China.”
“It’s not enough to just say you’ve opened the market for foreign investment to come in. If there are security concerns and issues with personal safety, who would still want to invest?” Huang Shicong remarked.