China’s FDI in 2025: What the First 10 Months Reveal

China’s FDI in the first 10 months of 2025 tells a story of resilience and transformation. Despite a dip in actual inflows, new foreign-invested enterprises surged, signaling confidence in China’s long-term potential. This article explores sectoral shifts, emerging source markets, and strategic opportunities for investors navigating a changing landscape.

Foreign Direct Investment (FDI) remains a critical barometer of China’s economic openness and integration with global markets. In the first ten months of 2025, China absorbed RMB 621.93 billion (Approx US$86.38 billion) in actual foreign investment, marking a 10.3 percent year-on-year decline. At the same time, the country registered 53,782 newly established foreign-invested enterprises (FIEs), up 14.7 percent year-on-year. This divergence between enterprise registrations and actual capital inflows underscores the complexity of China’s investment environment amid global uncertainties and domestic policy recalibrations.

In this article, we look beyond the headline numbers to examine which industries are attracting investment, where capital is coming from, and what is driving these changes. We also explore the challenges and opportunities shaping China’s FDI environment and provide insights into future trends, helping investors identify where the real potential lies in the world’s second-largest economy.

Headline numbers: A mixed picture

China’s FDI story in the first 10 months of 2025 is anything but straightforward. On the surface, the numbers seem contradictory: 53,782 new FIEs were set up, a solid 14.7 percent increase year-on-year, yet actual utilized foreign investment dropped to RMB 621.93 billion (Approx US$86.38 billion), down 10.3 percent from last year.

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So, what’s going on? The rise in new company registrations tells us something important: foreign businesses still see China as a critical market and a strategic hub. Despite global uncertainty, multinationals are clearly positioning themselves for the long term. This confidence is supported by China’s long-term growth potential, its vast consumer market, and its ongoing efforts to open up its economy, improve the business environment, and strengthen industrial ecosystems. For many firms, being in China isn’t optional – it’s essential.

But then there’s the other side of the coin: the decline in actual FDI inflows. The numbers show a continued contraction, a trend that started in late 2023, even as new FIE registrations surge. Does this mean investors are pulling back? Not necessarily.

Several factors help explain this gap:

• Geopolitical tensions: Heightened uncertainty around global trade and security is making boardrooms more cautious.
• Global economic slowdown: Recovery remains uneven, major economies are struggling with weak growth, and persistent risks are prompting multinationals to delay or scale down big-ticket investments.
• Intensifying competition for capital: Governments worldwide are offering aggressive incentives, such as tax breaks, subsidies, and regulatory perks, to attract limited global investment, putting pressure on China’s inflows.

In short, these mixed signals suggest that foreign investors are still entering China, but they’re doing so more cautiously – favoring smaller, phased investments and focusing on sectors with strong growth potential. For businesses eyeing China, the message is clear: the opportunities remain, but the playbook is changing.

Sectoral analysis: Services dominate, high-tech shines

China’s FDI profile in the first 10 months of 2025 shows a familiar pattern on the surface – services remain the dominant force, but dig deeper and a clear shift emerges: high-tech industries are rapidly becoming the star attraction, signaling China’s pivot toward an innovation-driven growth model.

The service sector: A stabilizing anchor

Foreign investment in the service sector reached RMB 445.82 billion (Approx US$61.5 billion), accounting for a commanding 71.6 percent of the total FDI inflows. This overwhelming share reflects two critical factors: the depth and breadth of China’s ongoing service sector liberalization and the enduring confidence of foreign investors in the vast potential of China’s consumer market and modern service industries. Sectors such as financial services, logistics, professional services (including legal, consulting, and accounting), and information technology services remain key magnets for capital.

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However, a closer examination suggests a more nuanced picture. While the sector’s overall performance is robust, internal divergence is likely present. Growth momentum may vary significantly between traditional consumer-facing services and higher-value-added segments like producer services and advanced digital services. Disaggregated data will be crucial for understanding which sub-sectors are leading this charge and which may be facing headwinds, providing a clearer map of the service economy’s evolution.

Manufacturing: A steady pillar

In contrast, the manufacturing sector attracted a stable, albeit more subdued, RMB 161.91 billion (Approx US$22.3 billion) in utilized FDI, representing approximately 26.0 percent of the total. This consistent performance reaffirms China’s foundational role as a global manufacturing powerhouse and the unparalleled strength of its comprehensive industrial chain and supply chain network. It demonstrates sustained foreign investor interest in establishing and maintaining a tangible presence within China’s real economy. This trend aligns closely with China’s national strategy of bolstering the manufacturing sector, pushing it towards higher-end, intelligent, and greener production. The continued commitment of foreign capital in this domain provides essential support for upgrading China’s industrial capabilities and enhancing its global competitiveness.

Also read: China Manufacturing Tracker 2025

High-tech industries: The bright spot

Most remarkably, high-tech sectors (including both manufacturing and service) have surged to the forefront, capturing RMB 192.52 billion (US$26.5 billion) in FDI, a figure that represents a striking 30.9 percent of total inflows. This impressive share and growth trajectory highlight a powerful new dynamic in China’s investment appeal. Within this category, specific segments delivered eye-catching performances:

• E-commerce services (+173.1 percent YoY):​ This explosive growth is underpinned by China’s position as the world’s largest and most dynamic e-commerce market. The rapid expansion of cross-border trade, the untapped potential of lower-tier cities, and the sophistication of supporting infrastructure, from mobile payments to smart logistics, present unprecedented opportunities for foreign players. Heightened policy support for the digital economy further solidifies investor confidence.
• Medical instruments & equipment manufacturing (+41.4 percent YoY) & Aerospace equipment manufacturing (+40.6 percent YoY):​ These parallel surges reflect a potent combination of immense domestic demand and strong state-led industrial policy. An aging population fuels a growing need for high-quality healthcare, while the imperative for domestic substitution creates space for advanced medical devices. Simultaneously, the rapid advancement of China’s aerospace sector, including commercial spaceflight and major aircraft projects, attracts foreign capital into these strategically vital fields.

This surge in high-tech investment aligns perfectly with China’s strategic push toward innovation-driven growth, as the nation positions itself as a global hub for advanced manufacturing and digital services. Going forward, foreign investors are expected to increasingly target sectors that dovetail with China’s industrial upgrading agenda, such as green energy, semiconductors, and biotechnology.

Regional and source country trends

China’s FDI sources in the first 10 months of 2025 reveal two clear dynamics: traditional partners remain steady, while emerging markets, particularly the Middle East, are stepping up in a big way.

Europe: Traditional partners show resilience

Despite global headwinds, some European economies posted notable growth:

• United Kingdom (+17.1 percent YoY)
• Switzerland (+13.2 percent YoY)

What’s driving this? Deepening cooperation in financial services, high-end manufacturing, biotech, and technology innovation. China’s demand for premium European products and services remains strong, and many firms leverage Hong Kong and other free ports for strategic investment structures. These flows reflect the enduring strength of China-Europe economic ties, even as broader global FDI trends soften.

Also read: EU-China Relations After the 2024 European Elections: A Timeline

Middle East: UAE leads the charge

The standout performer is the United Arab Emirates (UAE), with FDI inflows surging 48.7 percent. This spike reflects several converging factors:

• Economic diversification strategies in the Gulf, reducing reliance on oil and channeling sovereign wealth funds into global growth markets.
• Strategic complementarity between China and the Middle East in renewable energy, infrastructure, and the digital economy.
• Belt and Road Initiative (BRI) projects, which continue to strengthen connectivity and investment channels.

This momentum suggests other Middle Eastern economies may follow suit, further reshaping China’s FDI landscape and reducing reliance on traditional sources.

Also read: Gulf Wealth Powers China’s 2025 Investment Boom: From Finance to Energy

Challenges and opportunities: A cool-headed view with warm prospects

China’s FDI performance in 2025 reflects resilience, but it also underscores the complexity of the global investment environment. While the headline numbers show structural progress, foreign investors need to weigh both the headwinds and the tailwinds shaping the market.

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On the challenge side, global uncertainty remains a dominant theme. The world economy is still struggling to regain momentum, with geopolitical tensions and protectionist measures adding layers of unpredictability. These factors have made multinational corporations more cautious, slowing the pace of large-scale capital commitments. At the same time, as mentioned, competition for foreign investment is intensifying. For China, this means traditional cost advantages are no longer enough; competitiveness increasingly hinges on institutional innovation, a transparent regulatory environment, and a robust industrial ecosystem. Domestically, China faces the growing pains of economic transformation. The challenge lies in aligning inbound investment with strategic priorities such as industrial upgrading, green development, and inclusive growth, while avoiding low-end duplication and overcapacity. And although China’s market is far more open than a decade ago, some high-end services and digital trade segments still face entry restrictions, signaling room for deeper liberalization.

Yet, these challenges coexist with powerful opportunities:

• Unmatched market scale: With over 1.4 billion people and a rapidly expanding middle-income group, China offers unparalleled demand for diverse products and services. Consumption upgrading is creating space for premium brands and innovative solutions.
• World-class industrial ecosystem: As the only country covering all industrial categories under UN standards, China provides integrated supply chains and efficient logistics—reducing costs and accelerating time-to-market for foreign firms.
• Improving business environment: Ongoing reforms, from streamlined approvals to stronger IP protection and equal treatment for foreign firms, are making China more predictable and transparent for long-term investment.
• Innovation-driven growth: Massive R&D investment in AI, 5G, biotech, and clean energy is turning China into a global innovation hub. Foreign companies are increasingly setting up R&D centers and regional headquarters here to tap into talent and speed-to-market advantages.
• Green transformation: Carbon neutrality goals are fueling demand for renewable energy, EVs, green finance, and environmental technologies—areas where foreign expertise aligns perfectly with China’s priorities.
• Deepening institutional openness: Pilot programs in free trade zones and Hainan Free Trade Port are testing high-standard international rules, paving the way for greater liberalization and investment facilitation.

For investors, the message is clear: China’s challenges are real, but so are its opportunities, and they’re growing in sectors aligned with innovation, sustainability, and high-value services. Success will depend on strategic positioning, local partnerships, and agility in navigating a fast-evolving regulatory and market landscape.

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