Can China Convince the World of Its Commitment to Business Expansion?
China’s Vice Premier He Lifeng reiterated the commitment to encourage foreign investment during a recent meeting with business leaders. Foreign direct investment in China fell sharply by over 27% in 2024, prompting concerns despite some optimism among multinational corporations. The Chinese government is actively implementing measures to stabilize and attract FDI, but geopolitical uncertainties loom large, raising questions about future investment inflows.
On March 23, 2025, during a meeting with leading multinational companies, Chinese Vice Premier He Lifeng expressed China’s commitment to enhancing its business environment to attract foreign investment. He emphasized China’s economic resilience and potential, aiming for mutual benefits and shared prosperity through increased investments from global corporations. This presentation aims to underscore the significance of foreign investments in boosting China’s economy during challenging global circumstances.
Despite optimistic views from executives of multinational corporations about long-term cooperation, analysts highlighted concerns regarding U.S.-China trade relations. This apprehension arose after noting that foreign direct investment (FDI) in China decreased by over 27% in 2024, marking a significant decline and the steepest since data collection began in 2008. Comparatively, FDI had already dropped by 8% in 2023, indicating a concerning trend relative to the record high of $344 billion in 2021.
Moreover, the net outflow of FDI from China reached nearly $170 billion in 2024, the highest since 1990. While some critics view this as a deterrent for investment, many foreign companies are reducing their investments under pressure from their governments rather than reflecting a poor business climate. Interestingly, German companies have shown a willingness to defy governmental calls to diversify and continue investing in China, signifying an inconsistent sentiment within global markets.
Five days prior to He Lifeng’s address, China’s Minister of Commerce, Wang Wentao, also encouraged European firms, particularly during discussions with Airbus CEO Guillaume Faury. Wang assured the stability of China’s trade policies and expressed hope that European companies would capitalize on opportunities for expansion. Faury shared his commitment to sustaining investments in China for long-term growth, avoiding uncertainties associated with new tariff policies.
In February 2025, Chinese authorities introduced an action plan set to stabilize foreign investment through to 2025, identifying foreign capital as crucial for modernizing the economy. This plan involves supporting specific regions and sectors in adopting open policies for foreign investments. Additionally, it proposes easing restrictions on local financing for foreign-invested enterprises and allows foreign financial institutions to offer new financial services in free trade zones.
With these initiatives, He Lifeng’s statements aimed to reassure potential investors of China’s market stability and growth prospects despite existing geopolitical uncertainties. However, uncertainty persists regarding whether these measures will effectively counter the declining FDI inflows that China has experienced recently.
In conclusion, while China continues to make efforts to present itself as an attractive destination for foreign investment, several factors raise questions about the efficacy of these measures. The declining foreign direct investment statistics indicate underlying concerns and pressures that potential investors face, particularly in light of geopolitical tensions. Nevertheless, the optimism expressed by some multinational corporations represents a complex landscape where opportunities and risks coexist. The effectiveness of China’s actions in reversing the downward FDI trend remains to be seen, subject to external geopolitical factors and domestic economic conditions.
Original Source: news.az
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