FDI into China for H1 2026: Behind the Numbers

China FDI in the first half of 2026 reflects continued investor interest in the country despite global investment headwinds. This article explores what MOFCOM’s latest data reveals about investment trends and investor confidence.

China’s Ministry of Commerce (MOFCOM) recently reported on foreign direct investment in the first half of 2026, providing a snapshot of how foreign investment is evolving in China.

We see in this data a continuation of trends which have been in motion since 2022: The total value of foreign investment flowing into China declines, while the number of newly registered foreign companies rises further. Besides this continuity, the details of the report reveal some interesting signals about the changes in where foreign capital is coming from, and which sectors it is moving into.

This article unpacks these figures and what they signal about broader investment trends, the kinds of investment China are now attracting, and where policy is steering them.

FDI trends in H1 2026

In line with previous years, there has been a decline in the overall value of foreign investment coming into China in the first half of 2026, with the total sitting at RMB 402.14 billion, a year-on-year decrease of five per cent. This decline is however less than it was in the same period of 2025, the rate of contraction having shrunk 10.2 percentage points from 15.2 per cent.

Meanwhile, there has also again been a year-on-year increase in the number of foreign invested enterprises (FIEs) of 5.3 per cent. MOFCOM also noted that there were around 4,800 foreign businesses that chose to add additional investments to their businesses in China in this period.

There has been a year-on-year increase in foreign investment for the months May and June (5.9 per cent and 15.1 per cent, respectively). It remains to be seen whether this marks a sustained shift towards growth, but overall, the year-on-year change in FDI has been in a more favourable direction. As the UNCTAD’s report for the same period said, the figures point to signs of stabilisation as the pace of decline has slowed. Investors should watch for how FDI develops across the rest of 2026 to see how these trends shift.

MOFCOM’s announcement also reports a number of sectors which have seen growth, particularly in high-tech industries and services.

What the divergence tells us

The rise in the number of FIEs being established in China alongside a decline in total FDI value suggests a still cautious approach to market entry. This trend has emerged amid heightened geopolitical tensions, trade policy uncertainty, and broader efforts by multinational companies to diversify risk.

Rather than committing large amounts of capital upfront, many foreign firms appear to be securing a foothold in the market while retaining flexibility. In sectors such as services, technology, and other regulated industries, local incorporation is often a prerequisite for obtaining licences, participating in pilot programmes, or serving customers. Establishing an entity therefore preserves access to future opportunities without requiring substantial immediate investment.

At the same time, continued growth in the number of newly established FIEs indicates that foreign investors retain confidence in China’s long-term market potential. Despite prevailing headwinds, many companies appear unwilling to exit or ignore the market, instead keeping a presence that allows them to scale up if conditions become more favourable.

Survey evidence from the same period points to a similar conclusion. The European Union Chamber of Commerce in China’s latest business confidence survey found the first improvement in five years in the share of respondents reporting that doing business in China had become more difficult, while optimism regarding two-year profitability also increased. However, only 53 per cent of respondents ranked China among their top three investment destinations.

This broadly mirrors the MOFCOM data: Many firms remain cautious about committing significant new capital, but sentiment is improving.

Where there is growth

The report also pointed to a number of sectors where there has been growth. The report outlined how “high-tech industries” grew by 33.2 per cent, lifting their share of total inflows to a record 42.4 per cent; electronic and communication equipment manufacturing grew by 52 per cent; “technology achievement transformation services” by 57.1 per cent; and R&D and “design services” by 82 per cent.

This growth in particular industries align with the existing policy environment. There has been sustained emphasis on ‘new quality productive forces’ (新质生产力) and ‘high-quality development’ (高质量发展). These terms encompass a wide variety of overlapping industries but generally point in the same direction: advanced manufacturing, automation, biotechnology, new energy, and digital infrastructure.

An example of this policy emphasis is China’s latest Encouraged Catalogue for Foreign Investment, which pushes investors towards advanced manufacturing, high-end services, and energy conservation. Another place we have seen this emphasis is in the new pilot areas for services across China, with telecoms, healthcare, education, internet, and culture being specifically named as targets.

For foreign investors, the practical significance lies in what follows from this policy focus. These are the sectors where the Encouraged Catalogue, tax incentives, and pilot liberalisations are concentrated, and where market access has widened.

Sources of investment

According to MOFCOM data, there has been a substantial increase in foreign investments from particular source countries. The report mentions that there has been a 359.4 per cent, 52.7 per cent, 36.2 per cent, and 15 per cent increase in investment in China from Saudi Arabia, Switzerland, France, and South Korea, respectively, with these figures including investment channelled through free-port jurisdictions.

The data suggest that foreign interest in China remains broad-based. Alongside continued investment from established European partners such as France and Switzerland, inflows from Saudi Arabia grew particularly rapidly, reflecting the strengthening economic ties between China and Middle Eastern economies. However, these growth rates should be interpreted with caution, as they do not necessarily reflect the ultimate origin of capital and may be influenced by relatively small starting bases.

Overall, the figures indicate that while investors remain selective in their capital commitments, China continues to attract interest from a diverse range of foreign sources.

Outlook for investors

Looking into the future, FDI into China is likely to see continued contraction for 2026 as a whole although the fall in investment could be less than previous years. Investment will likely continue to move in the direction of higher value manufacturing and services. These sectors are supported by ongoing regulatory preference, expansion of pilot programmes, and the country’s large and sophisticated domestic market.

The recent Action Plan for Stabilising and Optimising the Utilisation of Foreign Investment, jointly issued by MOFCOM, the NDRC, and the Ministry of Finance in June 2026, sets out this vision for the changing investment landscape and a plan to address some of the long-term difficulties foreign investors have been experiencing. In particular, it calls for streamlined M&A procedures, more targeted data-transfer rules and further tax benefits for reinvestment. This points to a policy direction that is focused on consolidating and improving the existing FDI environment. Investors already in China or looking to move into the market should watch how these policies are implemented and what opportunities will arise through them.

How Dezan Shira & Associates can help

As China’s investment environment becomes more varied and complex, the value of local knowledge and careful structuring rises with it. Dezan Shira & Associates assists foreign investors with market entry and entity establishment, tax and incentive eligibility, licensing, and ongoing accounting, payroll, and compliance obligations. Our offices across China support clients from initial feasibility assessment through to operation and expansion. For guidance on investing or operating in China, contact us to speak with our advisors.