By South China Morning Post | Created at 2024-09-25 08:33:08 | Updated at 2024-09-30 19:23:16
5 days ago
Foreign direct investment (FDI) in actual use in China totalled 580.2 billion yuan (US$82 billion) in the first eight months of 2024, down 31.5 per cent year on year. Notably, this downward trend in China’s FDI inflow has shown no sign of changing since 2023, when there was an 8 per cent fall.
For a long time, foreign investment has been a key driving force of the country’s economic development. China has been working to attract such investment since the late 1970s. It was the introduction of foreign investment that ushered in a period of reform, opening up and socialist modernisation in China. Given the circumstances, should we be worried that the recent decline will cause China’s economy to slow further?
First, it’s worth pointing out that focusing solely on the withdrawal of foreign investments could be misleading. China is still a net importer of investment. In the past three decades, the value of China’s net FDI – that is, investments minus outflows – has always been positive. Moreover, China, with a total FDI inflow of US$163 billion, was still the world’s second-largest FDI recipient in 2023.
Even if foreign investment is really retreating, a more critical point is the extent to which such investments still affect China’s economy today. In other words, are they as irreplaceable as they were decades ago?
