China’s FDI in 2025: A Year of Recalibration

China’s FDI in 2025 reflects a year of structural adjustment. Official MOFCOM data highlights a services‑led investment structure, steady manufacturing fundamentals, and accelerating momentum in high‑tech sectors. Together, these trends point to continued foreign investor engagement amid a more cautious global environment.

On January 23, 2026, China’s Ministry of Commerce (MOFCOM) released official data on foreign direct investment (FDI) for 2025, providing a timely snapshot of how foreign capital performed amid a challenging global investment environment.

In general, the data points to another year of structural adjustment. Similar to the past few years, while headline FDI value declined, foreign investors continued to enter the Chinese market in large numbers, indicating sustained interest but a more cautious, phased investment approach. This divergence between capital volume and new enterprise formation reflects both global macroeconomic headwinds and shifts in investor strategy, rather than a simple erosion of China’s underlying investment fundamentals.

Globally, 2025 was another difficult year for cross‑border investment. According to UNCTAD, international FDI flows remain under pressure due to high global interest rates, geopolitical fragmentation, and companies reallocating capital toward risk diversification and regionalization strategies. In this context, China’s ability to remain among the top global FDI destinations by absolute value, and the largest among developing economies, underlines the continued gravity of its market.

Decoding China’s FDI performance in 2025

A tale of two metrics

One of the most striking features of China’s 2025 FDI performance is the contrast between a decline in utilized FDI and strong growth in newly established FIEs. According to the release, China recorded RMB 7,476.9 billion (US$104.7 billion) in utilized foreign investment during the year, a 9.5 percent decline year-on-year. At the same time, 70,392 new foreign‑invested enterprises (FIEs) were established nationwide, marking a 19.1 percent increase compared to 2024.

This continued dynamic suggests that many foreign investors opted to secure market presence first while postponing large capital outlays until greater clarity emerges on global demand, financing conditions, and policy direction. This pattern is particularly common in services, technology, and regulated sectors, where establishing an on‑shore entity is a prerequisite for licensing, pilot participation, and customer access.

On the other hand, the divergence suggests that foreign investors have not lost confidence in China. In an environment shaped by global economic uncertainty, tighter financing conditions, and ongoing geopolitical risk, many investors appear to be prioritizing optionality over immediacy, securing a local presence while deferring large, irreversible capital commitments. This approach enables investors to respond more flexibly as visibility improves on global demand conditions, domestic recovery momentum, and the durability of policy support measures.

Sectoral composition: services dominate

In 2025, China’s services sector absorbed RMB 5,451.2 billion (US$763.1 billion) in utilized foreign investment, accounting for 72.9 percent of total FDI. This marked an increase of 2.1 percentage points from 2024, when services represented 70.8 percent of inflows, and stands as the highest share on record.

Find Business Support

We guide firms through ownership rules, licensing frameworks, and regulatory structures that enable compliant regional expansion.

The growing dominance of services FDI mirrors deeper structural shifts in China’s economic model. Services have firmly replaced industry as the primary engine of growth, underpinned by ongoing digitalization, the expansion of business and professional services, rising healthcare demand, and the upgrading of household consumption. As these segments continue to outpace traditional industrial growth, foreign capital has increasingly followed market demand rather than factor‑cost advantages.

This trend also illustrates how market opportunities and regulatory openings are converging in services-related fields. Over recent years, China has progressively expanded market access in areas such as modern logistics, information and digital services, healthcare, financial services, and technology‑enabled business services. In many of these sectors, foreign participation is now not only permitted but actively encouraged through pilot programs and regulatory reforms.

Manufacturing FDI remains stable

While services continued to dominate China’s FDI landscape in 2025, manufacturing foreign investment remained broadly stable, reflecting the sector’s enduring importance to China’s overall investment fundamentals. In recent years, China has steadily optimized its policy environment for foreign investment in manufacturing. Foreign-invested manufacturing activities now span 31 major industry categories and 548 sub‑sectors, providing a broad and resilient base for industrial FDI.

In 2025, utilized foreign investment in manufacturing reached RMB 1,855.1 billion (US$259.7 billion), accounting for 24.8 percent of total utilized FDI. This share represents a 3.3‑percentage‑point increase compared to 2020, highlighting a medium‑term trend of stabilization and upgrading in manufacturing-related foreign investment. Compared with 2024, however, the manufacturing share declined modestly from 26.8 percent, reflecting a corresponding rise in the proportion of services FDI rather than a withdrawal of foreign capital from industrial activities.

Nevertheless, in our view, China’s manufacturing FDI is not contracting, but rebalancing within a changing investment structure. As services expand more rapidly and absorb a growing share of new foreign investment, manufacturing’s relative weight has naturally eased. At the same time, the absolute scale of manufacturing FDI remains substantial, and its policy support remains intact.

More importantly, the nature of foreign investment in manufacturing is continuing to evolve. Rather than large, labor‑intensive greenfield projects, foreign investors are increasingly focusing on technology‑intensive, higher value‑added manufacturing, often closely linked with R&D, advanced equipment, and integration into China’s domestic supply chains. This trend aligns with China’s broader industrial upgrading agenda and reinforces the role of manufacturing as a foundation sector, complemented, rather than displaced, by the growing services economy.

See also:

• China Manufacturing Tracker
• Why China is Still the Top Manufacturing Destination in Asia

High‑tech industries gain momentum in key segments

Foreign investment in China’s high‑tech industries showed notable resilience and faster‑than‑average growth in 2025, highlighting continued foreign investor interest in innovation‑driven and technology‑intensive segments of the Chinese economy.

According to MOFCOM data, utilized foreign investment in high‑tech industries reached RMB 2,417.7 billion (US$338.5 billion) in 2025, accounting for 32.3 percent of China’s total utilized FDI.

Within this broad category, several key subsectors recorded particularly strong growth. Foreign investment in e‑commerce services increased by 75 percent year‑on‑year, reflecting sustained demand for digital platforms, cross‑border commerce infrastructure, and technology‑enabled consumption services. At the same time, medical instruments and medical device manufacturing saw foreign investment grow by 42.1 percent, driven by an aging population, healthcare system upgrading, and continued demand for advanced diagnostics and medical equipment. Aerospace vehicles and equipment manufacturing also attracted increased foreign capital, with utilized FDI rising by 22.9 percent, underscoring China’s role as an important node in global aerospace supply chains.

Beyond these headline growth areas, foreign investment remained active in computer manufacturing, office equipment manufacturing, and both general‑purpose and specialized instrumentation manufacturing. These segments illustrate a broader trend in which foreign investors are focusing on precision manufacturing, advanced hardware, and equipment closely linked to digitalization and industrial upgrading, rather than traditional labor‑intensive production.

Investment sources: selective growth

From the perspective of investment origin, China’s 2025 FDI data points to selective growth from non‑traditional sources, even as overall inflows moderated. According to MOFCOM data, actual investment into China from Switzerland, the United Arab Emirates (UAE), and the United Kingdom (UK) increased by 66.8 percent, 27.3 percent, and 15.9 percent year‑on‑year, respectively, with figures including investment channeled through free‑port jurisdictions.

Find Business Support

We guide clients through each stage of location analysis, using cross-regional comparisons to identify optimal entry points.

These increases are notable given the broader global backdrop of subdued cross‑border investment. While Asia, particularly Hong Kong and Singapore, continues to account for the majority of FDI into China, the strong growth from European and Middle Eastern sources underscores China’s continued ability to attract capital from a diverse set of investors, particularly in sectors aligned with advanced manufacturing, energy transition, technology, and high‑end services.

The prominence of Switzerland and the UK reflects ongoing interest from European investors with longstanding exposure to China, many of whom are engaging through incremental expansion, reinvestment, or restructuring of existing operations. Meanwhile, rising investment from the UAE highlights growing capital linkages between China and the Middle East, driven by cooperation in areas such as new energy, infrastructure, logistics, and financial services.

Policy environment: Factors supporting FDI in 2025

China’s 2025 FDI performance cannot be separated from a series of policy signals explicitly aimed at stabilizing and upgrading foreign investment.

Expanded services opening

In April 2025, MOFCOM released the Work Plan for Accelerating the Comprehensive Pilot Program to Expand the Opening of the Services Sector, approved by the State Council. The plan expanded pilot coverage to nine additional cities, Dalian, Ningbo, Xiamen, Qingdao, Shenzhen, Hefei, Fuzhou, Xi’an, and Suzhou, and introduced 155 pilot tasks across areas such as telecommunications value‑added services, healthcare, finance, culture and tourism, professional services, and logistics.

These pilots provided foreign investors with clear testing grounds, regulatory experimentation mechanisms, and greater policy predictability in traditionally restricted service sectors.

Toward a unified national market

The issuance of the Guideline for Building a Unified National Market (Trial) at the turn of 2025 marked a structural reform milestone. The guideline emphasizes unified market access standards, enhanced enforcement of fair competition, and reduced arbitrary administrative intervention across regions.

For foreign investors operating across multiple provinces, this reform agenda directly addresses long‑standing concerns over inconsistent enforcement, local protectionism, and duplicated compliance requirements.

Improved capital and treasury flexibility

China continued to optimize cross‑border capital management for multinational companies in 2025. Policies expanding the integrated RMB and foreign‑currency cash-pooling system, originally piloted in major regions, reduced administrative burdens and enabled greater flexibility in intercompany funding, cross‑currency lending, and centralized payment management.

These measures materially lower operational and financing friction for established foreign enterprises, particularly regional headquarters and treasury centers.

Incentivizing reinvestment

In June 2025, China introduced a new tax credit policy allowing eligible foreign investors to credit 10 percent of reinvested profits against corporate income tax, applicable from 2025 to 2028, when investments target industries listed in the Catalogue of Encouraged Industries for Foreign Investment

This policy sends a clear signal that China seeks not only new entrants, but also long-term capital commitment and expansion by existing foreign investors.

Expanded encouraged industries

In December 2025, China released the Catalogue of Encouraged Industries for Foreign Investment (2025 Edition). Taking effect on February 1, 2026, the updated Catalogue replaces the 2022 version and represents a renewed commitment to attracting global investment across advanced manufacturing, modern services, green development, and regional development priorities. Compared with the 2022 edition, the new catalogue has 205 net new entries and 303 revisions.

With expanded industry coverage, clearer regional guidance, and strengthened policy incentives, the new Catalogue provides multinational companies with a roadmap to align their China strategies with the country’s long-term development priorities.

Looking ahead: What 2025 signals for 2026

Looking into 2026, China’s FDI trajectory is likely to remain shaped by structural factors rather than short‑term rebounds. Services are expected to continue leading foreign investment, supported by ongoing regulatory opening, pilot expansion, and the country’s large and increasingly sophisticated domestic market.

Manufacturing investment is likely to remain stable but increasingly concentrated in high‑value segments such as advanced equipment, medical technology, aerospace, and green industries. Rather than large, capital‑intensive greenfield projects, foreign manufacturers appear poised to prioritize incremental expansion, R&D localization, and closer integration with domestic supply chains.

At the same time, the effectiveness of unified market reforms and the consistency of local‑level implementation will be crucial in determining investor confidence. Continued progress in these areas would further reduce operational uncertainty and reinforce China’s attractiveness as a long‑term investment destination.

In short, while China’s FDI inflows in 2025 reflected global caution, the underlying data suggest resilience in investor interest and an ongoing upgrade in investment quality. For foreign investors with a medium‑ to long‑term perspective, 2026 is likely to present opportunities shaped less by scale alone and more by strategic fit with China’s evolving economic and regulatory landscape.

As one of Asia’s leading business setup consultants, we help companies structure entities to meet strategic goals and maximize operational efficiency, including cross-border asset transfers, M&A transactions, and corporate relocations. To arrange a consultation, please contact China@dezshira.com. 

• Previous Article China and Canada Ease Tensions with Signing of Preliminary Trade Deal
• Next Article