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In this page: FDI in Figures | What to consider if you invest in China | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information


FDI in Figures

According to the World Investment Report 2023 published by UNCTAD, FDI inflows into China increased by 4.5% year-on-year in 2022, totalling USD 189.1 billion (above the pre-COVID level), making the country the second-largest host country in the world. The increase was concentrated in manufacturing and high-tech industries (mainly electronics and communication equipment) and came mostly from European MNEs. Cross-border M&A sales tripled to USD 15 billion. The largest deals were the 4 billion USD acquisition by BMW (Germany) of a further 25% stake in BMW Brilliance Automotive, a Beijing-based manufacturer and wholesaler, and the USD 3.4 billion merger of COVA Acquisition (United States) and ECARX Holdings, a Shanghai-based manufacturer of semiconductors and electronics. In the same year, the total stock of FDI stood at USD 3.82 trillion, around 21.1% of the country’s GDP. China is also the third-largest investor worldwide, with a stock of outward FDI estimated at USD 2.93 trillion at the end of 2022. Hong Kong, the Virgin Islands, Japan, Singapore and the United States are among the major investors (data U.S. Trade Administration). Investments are mainly oriented towards manufacturing, real estate, leasing business and services, and computer services. Data from the Peterson Institute for International Economics and sourced from China’s State Administration of Foreign Exchange (SAFE) shows FDI inflows have hit multi-year lows in 2023, totalling only USD 15 billion. Among the reasons for the decrease were escalating geopolitical tensions, as the “chip war” with the U.S. concerns foreign investors, particularly American-headquartered companies operating in China, leading to hesitancy in investing in local firms. Moreover, the closure of due diligence firms, essential for foreign investors to make informed decisions regarding Chinese companies, coupled with a new national security law targeting cross-border data flows, has discouraged significant investments.

Over the last few years, China made improvements in a wide array of subcomponents ranging from procedures for starting a business to measures to improve electricity access and get construction permits. The country demonstrated reform agendas that aim to improve the business regulatory environment. The reforms mainly focus on increasing the efficiency of business processes, such as tax cuts, trade with tariff cuts, and reduced barriers to foreign investors. In order to attract further foreign investment, the country has introduced mechanisms to improve the delivery of major foreign investment projects, reduce import tariffs, streamline customs clearance, and establish an online filing system to regulate FDI. With a wealth of employees and potential partners eager to learn and evolve, the country is a base for low-cost production, which makes it an attractive market for investors. Nevertheless, certain factors can hinder investments, such as China’s lack of transparency, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which favour local businesses. The revised investment screening mechanism under the Measures on Security Reviews on Foreign Investments took effect on January 18, 2021, without any public comment period or prior consultation with the business community. Foreign investors expressed dissatisfaction with China's new investment screening rules, citing their broad scope, lack of an investment threshold triggering a review, and inclusion of greenfield investments, a departure from practices in most other countries. Additionally, concerns grew among foreign investors due to new guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, a measure akin to "blocking statutes" in other markets, exacerbating worries about the legal complexities of complying with both host-country regulations and those in China. Foreign investors lamented that national security-related legislation increasingly undermined market access in China. Finally, the country ranks 12th among the 132 economies on the Global Innovation Index 2023 and 151st out of 184 on the 2023 Index of Economic Freedom.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 149,342180,957189,132
FDI Stock (million USD) 1,918,8283,633,317-6,914,969
Number of Greenfield Investments* 413482357
Value of Greenfield Investments (million USD) 33,63731,71617,966

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.



Main Investing Countries 2022, in %
Hong Kong 72.6
Singapore 5.6
Virgin Islands 3.5
South Korea 3.5
Japan 2.4
Netherlands 2.4
Germany 1.4
Main Invested Sectors 2022, in %
Manufacturing 26.3
Leasing and business services 17.5
Scientific research, technical service and geologic prospecting 16.0
Information transmission, computer services and software 12.6
Wholesale and retail trade 7.7
Real estate 7.5
Financial intermediation 3.6

Source: National Bureau of Statistics, Latest data available.

Form of Company Preferred By Foreign Investors
Form of Establishment Preferred By Foreign Investors
Main Foreign Companies
A substantial number of foreign multinationals operate in China: GM, KFC, Cummins (CMI), Starbucks, Apple, Intel (INTC), Dell Computer (DELL), Texas Instruments (TXN), Walmart, Nike (NKE), Gucci, Abercrombie & Fitch, Toyota and Samsung.
Sources of Statistics
Invest in China

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What to consider if you invest in China

Strong Points

Strong points for FDI in China include:

  • The largest internal market in the world, with 1.44 billion potential customers
  • Sovereign risk contained as public debt remains mainly domestic and denominated in local currency
  • Importance of foreign currency reserves and public debt owned by Chinese government and individuals
  • A well-developed production sector (manufacturing sector and heavy industry)
  • A favourable geographic location (close to emerging Asian markets, to Japan, maritime frontage)
  • Top economy in terms of purchasing power parity (PPP) thanks to rapid growth of the economy
  • Labour costs remain comparatively low, although the situation is changing in certain areas
  • New opportunities with the development of the western provinces (particularly Sichuan province)
  • Development of a new export network (Silk Road network)
Weak Points

Some of the disadvantages for FDI in China include:

  • An ever-changing legal environment
  • Bureaucratic and administrative complexities
  • A lack of transparency and weak intellectual property rights protection
  • Ageing population
  • High level of corporate indebtedness
  • Production overcapacity in several sectors
  • A strongly degraded environmental situation in several big cities
  • Cultural differences in business practices that may be difficult for foreigners to learn and apply in new business situations
  • Underdeveloped middle management and low rate of qualified workers
Government Measures to Motivate or Restrict FDI
Generally speaking, the Chinese government is more restrictive than other big economies in regard to foreign investment, with numerous sectors closed to FDI. State companies and "national flagships" are protected (discriminatory practises, non-independent judicial power, selective application of regulations). Until a few months ago, the Chinese state required forced technology transfer and its system of intellectual property protection was among the weakest in most industrialised countries.

The Chinese government encourages investment in the following industries or sectors: high technology, production of equipment or new materials, service sector, recycling, use of renewable energies and protection of the environment. In addition, the country appears to discourage foreign investment in key sectors, for which China seeks to transform domestic firms into globally competitive multinational corporations and sectors that have historically benefited from state monopolies or traditionally of State. The government also discourages investments intended to profit from speculation (money, real estate, or assets). In addition, the government plans to limit foreign investment in resource-intensive and highly polluting industries.

The Law on Foreign Investments of the People's Republic of China, adopted at the second session of the 13th National People's Congress on 15 March 2019, has been in force since 1 January 2020. The new Foreign Investment Law seeks to address common complaints from foreign businesses and governments. The Law specifically prohibits the government and government officials from forcing transfer of technology, while technology cooperation on the basis of free will and business rules is encouraged by the state. Indeed, article 22 stats that the State shall protect the intellectual property rights of foreign investors and foreign-funded enterprises. The law also gives the possibility to foreign investors to receive the same treatment when they apply for licences (article 30) and participate in public procurement (article 16). The competent departments for commerce (Ministry of Commerce) and for investment (National Development and Reform Commission) are delegated major responsibility to promote, protect and manage foreign investment.

On June 23, 2020, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOF) jointly issued two "negative lists" (on Foreign Investment and Free Trade Zone Special Administrative Measures) and a draft edition of the Catalogue of Encouraged Industries for Foreign Investment. Compared with the 2019 edition (full list in Chinese available here), the proposed 2020 Foreign Investment encouraged catalogue has been further lengthened, with 125 new industries added and 76 previously listed industries amended. There are no major changes compared to the 2019 catalogue; it welcomes more FDI in the following three main areas of China: high-end production; production-oriented service industries; China’s central, western, and northeastern provinces.

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Protection of Foreign Investment

Bilateral Investment Conventions Signed By China
China has signed bilateral agreements for investments with several countries. To see the list of the countries, consult UNCTAD website.
International Controversies Registered By UNCTAD
The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. China is involved in 6 cases as Home State of claimant and in 3 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency
China is a signatory of the Convention of MIGA.
Country Comparison For the Protection of Investors China East Asia & Pacific United States Germany
Index of Transaction Transparency* 10.0 5.9 7.0 5.0
Index of Manager’s Responsibility** 4.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.7 9.0 5.0

Source: The World Bank - Doing Business, Latest data available.

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Procedures Relative to Foreign Investment

Freedom of Establishment
The Foreign Investment Law of the People's Republic of China implements a “pre-establishment national treatment” plus “negative list management” system for foreign investment. “Pre-establishment national treatment” refers to the treatment given to foreign investors and their investments with regard to market access, which may not be less favourable than that given to their domestic investors and their investments. The “negative list” refers to the special administrative measures for the access of foreign investment in specific fields, which will be issued or approved for issue by the State Council. The Law provides that the state grant national treatment to foreign investment that are not included in the negative list.
Acquisition of Holdings
The acquisition of majority interest in a local company is authorised in China. M&A activities are subject to different regulations depending on whether the company is a public, a non-listed public company or foreign.
Obligation to Declare
The China International Investment Promotion Agency facilitates the distribution of information on necessary authorisations for establishing a business in the country. All proposed foreign investment projects in China must be submitted for 'verification' and approval to the National Development and Reform Commission (NDRC) or to provincial or local Development and Reform Commissions (depending on the sector and value of the investment.
Competent Organisation For the Declaration
National Development and Reform Commission (NDRC)
Requests For Specific Authorisations
Business plans must be submitted for approval to competent authorities prior to the beginning of business activity. If a foreign investor intends to establish a foreign-funded enterprise by merging a domestic enterprise in accordance with these provisions, he/she shall be subject to the approval of the “examination and approval organ” and modify the registration or go through the establishment registration in the “registration administrative organ”. “Examination and approval organ” refers to the Ministry of Commerce. The term “registration administrative organ” refers to the State Administration for Industry and Commerce (SAIC) or its authorized local administrations for industry and commerce. Chinese State-Owned Enterprises are often the targets of foreign investors. Although, it is important to note that additional rules apply to the purchase of State-Owned Enterprises by foreign investors in China. Greenfield investment projects must also seek approval from China's Environmental Protection Ministry and its Ministry of Land Resources.

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Office Real Estate and Land Ownership

Possible Temporary Solutions
Rental and Business center. 
The Possibility of Buying Land and Industrial and Commercial Buildings
Foreigners are allowed to buy their property only after having worked or studied in China for at least one year.  They are only entitled to own one property in China and it must only be used for residential purposes.  Commercial or industrial property can only be purchased after a company has been incorporated in China.
Risk of Expropriation
The risk of expropriation is high. Article 20 of the Foreign Investment Law of the People's Republic of China stipulates that the government shall not expropriate investments made by foreign investors. Only in special circumstances (national security and obstacles to large civil engineering projects), the State may expropriate or requisition an investment made by foreign investors for public interest in accordance with the law. Such expropriation or requisition shall be carried out in accordance with the procedures of law and fair and reasonable compensation shall be given in a timely manner.

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Investment Aid

Forms of Aid
Foreign investors enjoy corporate tax reductions, exemptions of tax on dividends repatriated during a certain period and other tax advantages. Moreover, foreign direct investment incentives include packages of reduced income taxes, resource and land use fees, and import/export duties, as well as priority treatment in obtaining basic infrastructure services, streamlined Government approvals, and funding support for start-ups. The Ministry of Commerce (MOFCOM) can be contacted for any information concerning opportunities in China.

According to the Notice on Implementing the Policy of Inclusive Tax Relief for Small and Micro Enterprises, published by the Ministry of Finance in January 2019, China expanded existing preferential policies for small and low-profit enterprises. Companies with annual taxable income below RMB 1 million (US$147,290) per year can benefit from a preferential corporate income tax (CIT) rate of 20 per cent, they are only taxed on 25 per cent of their income, while the remaining 75 per cent is tax-free.

Privileged Domains
China encourages foreign investment primarily in high technology, clean energy and export-oriented sectors.
Privileged Geographical Zones
China's Economic Development Zones (EDZs) are areas with preferential trade policies which differ from those governing the country as a whole. EDZs provide a wide range of incentives for FDI, which vary according to the EDZ specification. Companies operating in EDZs can expect, among other incentives, a higher level of autonomy over their operations, a variety of tax exemptions, subsidies for land and buildings and preferential employment policies.
Free-trade zones
In China there are many special trade zones. These special zones provide exceptions to the standard customs procedures and allow tax exemptions or tax incentives to attract overseas investments. They are primarily the 5 special economic zones and the 14 coastal cities. The special zones are Shenzhen (at the border of Hong-Kong SAR), Zhuhaï (close to Macau SAR), Shantou, Xiamen (vis-à-vis Taiwan, China) and the island of Hainan. They were selected because they were completely under-developed.

The 14 coastal cities are Dalian (in the province of Liaonong), Shanghai, Ningbo, Wenzhou (in the province of Zhejiang), Fuzhou (in the province of Fujian), Guangzhou, Zhanjiang (in the province of Guangdong), Beihai (in the autonomous region of Guangxi Zhuang), Tianjin, Yantai, Qingdao (in the province of Shandong) and Lianyungang, Nantong (in the province of Jiangsu). For the past few years, other cities have also been regarded as coastal towns profiting from the same status. Unlike the 5 special zones, these cities were not underdeveloped, but key industrial centres in China. Overseas investment has facilitated improvements to the infrastructure and the creation of new, more advanced ones.

In August 2019, China announced that it will expand the Pilot Free Trade Zones (FTZs) to six new provinces across the country. These are Jiangsu, Shandong, Hebei, Heilongjiang, Guanxi and Yunnan, bringing the total number of Chinese FTZs from 12 to 18.

Public aid and funding organisations
Invest in China - Investment Promotion Agency of Ministry of Commerce (CIPA) is engaged in Chinese investment promotion process and in charge of “Inviting in” (FDI in China) and “Going global” (outbound investment) two-way investment promotion work.

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Investment Opportunities

The Key Sectors of the National Economy
Manufacturing sector, automobile industry, information and communication technology, aeronautics, energy (including nuclear energy), services, finance, building, tourism, health, agriculture, mining extraction, health, online sales (largest world market), transport infrastructure
High Potential Sectors
Chemical industry, insurance and bank, high technology, renewable energy, environment, waste treatment, franchises, medical devices. 
Privatization Programmes
China, whose economy is mixed, has a high number of state-owned corporations. Many of these firms suffer from disadvantages such as over-indebtedness and low efficiency, among others. The Chinese state wants to open these firms to private capital. Partial privatisation of numerous Chinese state-owned enterprises has been discussed since 1993, without having led to deep changes in the Chinese economic landscape. Under the government of President Xi Jinping, the mixed-ownership reform, which injects private capital into state-owned enterprises, is being promoted. One example of a privatisation effort is that at the end of 2016, the state announced the end of its monopoly on salt production. To date the effort is progressing but is still subject to resistance.
Tenders, Projects and Public Procurement
Tenders Tiger , Tenders in China
Tenders Info: Global Procurement Facilitator , Tenders in China
DgMarket , Tenders Worldwide

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Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
The Negative List for Market Access (2020 chinese edition) refers to a list of prohibited or restricted industries for foreign investment. The new 2020 National Negative List aims to accelerate the process of further opening key areas in service industries. It has further relaxed foreign investment’s access to the manufacturing and agriculture sectors compared to the 2019 Negative List. The main restrictions are on the following sectors: Production and supply of electricity, heat, gas and water; Transportation, warehousing and postal industries; Information transmission, software and information technology services; leasing and business service; Scientific research and technical services. The 2022 list of industries that are either restricted or prohibited has been cut to 117, according to a document released by the National Development and Reform Commission, from 123 on the 2020 list.

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