Special to The Kaohsiung Times (Images courtesy of author)
By Taiwan’s Representative to Singapore, TUNG Chen-Yuan, PhD.
2025/11/12
According to preliminary statistics released by China’s State Administration of Foreign Exchange, foreign direct investment (FDI) into China reached only USD 8.5 billion in the third quarter of 2025 — a sharp drop of more than 50% from USD 17.36 billion in the previous quarter, representing a quarterly contraction of USD 8.86 billion. Cumulative FDI for the first three quarters amounted to just USD 40.38 billion, highlighting the persistent weakness in China’s ability to attract foreign capital and the continued lack of investor confidence.
A review of quarterly trends shows that in the first quarter of 2022, China’s FDI had surged to USD 107.2 billion, setting a historic quarterly record. However, from the second quarter of that year, foreign inflows began to plummet, falling to USD 37.76 billion, a drop of more than 60% from the previous quarter. This turning point marked the beginning of a cautious shift among foreign investors toward the Chinese market, reflecting a combination of uneven post-pandemic recovery, regulatory uncertainty, and mounting geopolitical risks.
Since then, FDI inflows have continued to shrink, with multiple quarters of net capital outflows recorded in 2023 and 2024 — a rare phenomenon in China’s investment history. FDI in the third quarter of 2023 registered a net outflow of USD 10.85 billion, while the second and third quarters of 2024 saw even larger outflows of USD 14.97 billion and USD 11.62 billion, respectively. Such “negative growth” indicates that foreign investors not only halted new investments but also repatriated existing capital. The trend has been particularly pronounced in the high-tech, financial services, and manufacturing sectors, where confidence among Western companies in China’s business environment has markedly deteriorated.
The FDI net inflow of USD 8.5 billion in the third quarter of 2025 represents China’s fourth-lowest quarterly figure since joining the World Trade Organization (WTO) in 2001. It is even lower than the pre-WTO quarterly average of USD 10.3 billion recorded between 1998 and 2001, and only slightly above the three quarters of net outflow seen in 2023 and 2024. This suggests that China’s foreign investment environment has effectively regressed to pre-WTO levels.
Over the longer term, China’s accession to the WTO initially ushered in a sustained period of steady FDI growth. Between 2002 and 2015, China averaged USD 48.2 billion in quarterly net FDI inflows, which further rose to USD 55.4 billion between 2016 and 2022 — underscoring China’s role as the “world’s factory” and a key global supply chain hub. However, by 2023, quarterly FDI had plunged to USD 12.8 billion, and in 2024 it fell further to just USD 4.6 billion. Although the first three quarters of 2025 saw a modest recovery to an average of USD 13.5 billion, this remains far below the levels seen before the pandemic and the U.S.–China trade war.
From an annual perspective, FDI inflows peaked in 2021 at USD 344.1 billion, before plunging sharply from 2022 onward. In 2022, total FDI dropped to USD 190.2 billion, a 45% year-on-year decline. The following year, it fell dramatically to USD 51.3 billion, down 73%, marking the lowest level since 2003. In 2024, FDI sank even further to just USD 18.6 billion, the lowest since records began in 1998 — a 64% decline from the previous year. Compared with 2022, China’s total annual inflows have contracted by more than 90% in just two years.
Overall, China’s cumulative FDI of USD 40.38 billion in the first three quarters of 2025 is far below the annual average of USD 221.5 billion from 2016 to 2022, and USD 193 billion from 2002 to 2015. It has nearly fallen back to the pre-WTO average of USD 41.3 billion recorded from 1998 to 2001. This dramatic reversal suggests that China’s position in the global investment landscape is rapidly deteriorating and that foreign investors’ risk assessments of the Chinese market are undergoing a fundamental reassessment.
About the Author:
Taiwanese scholar Dr. Tung Chen-yuan (童振源) is currently Taiwan’s representative in Singapore. This article is republished with permission
