Last month, during a work report, the Ministry of Commerce also disclosed the figures for foreign investment in the first quarter.

At the time, Vice Minister of Commerce Guo Tingting noted that, in terms of foreign investment, the "Invest in China" campaign had generated an enthusiastic response.

It is worth noting that executives from multinational corporations have sparked a new wave of interest in coming to China.

At this stage, the scarcest resource is the market, and market resources are China’s greatest strength.

For this very reason, China’s door to the outside world will only open wider and wider.

Invest in China and seize the opportunities it offers.

For foreign investors, what are the signals indicating the right time to invest in China? There are three key indicators:

First, the inaugural “Invest in China” event.

It is reported that the event attracted over 140 representatives from foreign enterprises and business associations across 17 countries and regions.

Second, the number of newly established foreign-invested enterprises in the first quarter reached 12,000, a 20.7% increase.

Among these, foreign investment in high-tech manufacturing accounted for 12.5%, an increase of 2.2 percentage points compared to the same period last year.

Third, in terms of investment scale, actual utilization of foreign capital reached 301.67 billion yuan in the first quarter, remaining at a historically high level.

The growth in the number of newly established enterprises serves as a bellwether and will provide some support for future capital inflows.

Fluctuations in foreign investment are a normal phenomenon.

Since last year, China’s foreign investment figures have shown some fluctuations.

Given the global landscape of multinational investment and the conditions of various economies, fluctuations in foreign direct investment are a normal phenomenon.

The situation regarding China’s foreign investment attraction requires a comprehensive analysis; we must not only look at changes in the scale of investment but also recognize the optimization of the investment structure and future development prospects.

In terms of scale, China’s FDI inflows reached a record high in the first quarter of last year, while the first quarter of this year saw a year-on-year decline, which was indeed influenced by the high base effect.

Foreign investment typically follows a process from project signing and company registration to construction completion and production commencement. During this process, foreign capital continues to flow in as project construction progresses, so fluctuations in the data are relatively common.

In terms of structure, China’s manufacturing sector utilized 81.06 billion yuan in actual foreign investment during the first quarter of this year.

Of this, investment in high-tech manufacturing reached 37.76 billion yuan, accounting for 2.3 and 2.2 percentage points more of the national total than in the same period last year, respectively, with investment in some advanced manufacturing sectors growing rapidly.

For example, investment in the medical equipment manufacturing sector surged by 169.7% year-on-year, fully demonstrating the continuous optimization of China’s investment structure.

According to the 2024 Global Foreign Direct Investment Confidence Index, China’s ranking jumped from 7th last year to 3rd, reflecting multinational corporations’ willingness to continue expanding their investments in China.

There are two main categories of foreign direct investment in China.

The first category consists of foreign-invested enterprises whose end markets are directly anchored in the Chinese domestic market.

The second category consists of foreign enterprises that use China as a processing and assembly base to export products globally.

Over the more than 40 years since the launch of reform and opening-up, the second category initially dominated, but its share has gradually declined, while that of the first category has steadily increased.

In fact, as China’s rapid economic growth has led to a gradual rise in domestic factor costs (especially labor costs), China’s comparative advantage in attracting the second category of foreign enterprises has been declining relative to India, ASEAN countries, Mexico, and others.

However, in addition to factor costs, these enterprises also place great emphasis on factors such as the availability of supporting industrial chains, the level of infrastructure development, and the reliability of resource and energy supplies.

China’s advantages in these areas remain significantly stronger than those of other emerging market economies, which is why Category 2 foreign-invested enterprises remain deeply conflicted about whether to leave China.

The withdrawal and relocation of foreign investment is not necessarily a bad thing.

The exodus of foreign capital did not begin last year; it has actually been unfolding over the past few years.

It was only in 2023, when foreign direct investment (FDI) turned negative, that the phenomenon of capital outflows came to the surface, attracting widespread attention.

The shift of foreign capital in China is, at its core, a reconfiguration of international industrial chains—a natural flow of international capital following the decline of China’s labor cost advantages and other factors.

To some extent, this industrial shift—driven by differences in development stages—is not entirely detrimental to the Chinese economy; in fact, it may even force the Chinese economy to transition from low-end to high-end industrial chains.

Furthermore, some countries have realized that over-reliance on specific core nodes within industrial chains can leave them vulnerable to external shocks.

In other words, many regions are seeking to bring industrial and supply chains closer to home, making them more diversified and easier for their own countries to control, which has led to the withdrawal of subsidiaries of some multinational corporations from China.

With the intensification of foreign investment policies, attracting foreign capital has found new avenues.

In April of this year, four ministries detailed new policies to stabilize foreign investment: continuing to relax restrictions on foreign investment access and ensuring that policies to attract foreign investment are effectively implemented.

Upon reviewing the document, the content is quite straightforward.

These measures include shortening the negative list for foreign investment access, expanding the catalog of industries encouraged for foreign investment, implementing national treatment for foreign-invested enterprises, and strengthening services for foreign-invested enterprises.

At this stage, the fundamental appeal of the Chinese market to foreign investors lies in its complete industrial chain and the immense opportunities inherent in its massive consumer market.

The release of this action plan further demonstrates that local governments are stepping up their efforts to attract foreign investment, ensuring that investors can confidently reap the benefits of the Chinese market.

Preliminary indications suggest that the revision of the national catalog will continue to prioritize the manufacturing sector as a key focus for encouraging foreign investment, while promoting the integrated development of the service and manufacturing sectors and increasing support for advanced manufacturing, modern services, high-tech industries, and energy conservation and environmental protection.

With executives flocking to China, foreign capital is pouring into the country.

While the central government has been actively demonstrating China’s sincerity, executives from multinational corporations are also taking concrete actions to show their commitment to opportunities in China, with a recent surge in visits to the country.

The most closely watched figure is undoubtedly Apple CEO Tim Cook, who not only attended the opening of Apple’s largest retail store in mainland China but also held discussions with suppliers such as BYD, Lens Technology, and Changying Precision.

In addition, executives from multinational corporations, including GlaxoSmithKline Global CEO Emma Wei and Nestlé CEO Mark Schneider, have also been making frequent visits to China recently.

This once again underscores the market appeal of China’s vast market and supply chain, and reaffirms the inevitable trend of globalization.

Policies act as a “magnifying glass,” amplifying opportunities in China.

Against the backdrop of the global economy, the Chinese economy has demonstrated remarkable resilience. In 2023, China’s GDP reached 126 trillion yuan, representing a year-on-year increase of 5.2%, making it a key engine of global economic growth.

In terms of global growth potential, the Chinese market is a vast reservoir of potential that cannot be ignored. China has a population of over 1.4 billion, with more than 400 million people in the middle-income group.

In terms of the industrial foundation for global economic recovery and development, China possesses 41 major industrial categories, 207 medium-level industrial categories, and 666 minor industrial categories, making it the only country in the world to cover all industrial categories in the United Nations Industrial Classification.

A series of measures demonstrating China’s sincerity are, in essence, designed to create suitable entry points and opportunities for foreign investors to seize opportunities in China. At the same time, from the perspective of China’s own development needs, foreign investment is a vital force for participating in the construction of Chinese-style modernization and promoting the shared prosperity of the Chinese and global economies; it is also a key driver of China’s current economic strategy of “seeking progress while maintaining stability.”

In Conclusion

Short-term fluctuations in foreign investment data are a normal phenomenon consistent with economic laws.

In particular, the implementation of major projects often influences fluctuations in the current year as well as the following two years. The long-term positive fundamentals of China’s economy remain unchanged, especially given China’s adherence to the fundamental state policy of opening up. China continues to keep its doors wide open and sincerely welcomes enterprises from all countries to invest in China.