Insight: Is foreign capital really withdrawing from China?
Lately, there has been much talk about foreign investors withdrawing from China on a large scale. Official data show that in 2024, foreign direct investment (FDI) in the Chinese mainland in actual use dropped by 27.1 per cent year on year, while the number of new foreign-invested firms increased by 9.9 per cent from a year ago. Are these two figures in conflict with each other?
To answer this question, let's first delve into a story about Walmart's development in the Chinese market.
Over the past few years, retail giant Walmart has been actively closing locations across China. Many people just feel like that 'Walmart is withdrawing from China.' But is this the whole picture? Certainly not. On December 18, 2024, Walmart-owned Sam's Club opened its 52nd store in Wenzhou, east China's Zhejiang province. More strikingly, in the third quarter of 2024, Walmart's net sales in China climbed 17 per cent year on year.
So how could a company that is allegedly 'pulling out of China' maintain steady sales growth in the Chinese market?
Walmart's story highlights important shifts in the Chinese market: as personalised and diversified consumption has emerged as a new trend among Chinese consumers, and with the rapid development of Chinese domestic retailers, traditional business models are struggling to survive in the country. Only those foreign companies that adapt quickly to the evolving Chinese market can succeed. Simply put, the times have changed. The Chinese market is no longer what it used to be, and China's relationship with foreign investment has also changed.
Does China still need foreign investment?
Before discussing whether foreign investment is leaving the Chinese market, it is essential to clear up one question: Does China still need foreign investment?
China has entered a new stage of high-quality development and has moved from capital scarcity to capital abundance. The country is shifting its focus from attracting foreign investment to a new strategy with equal emphasis on both 'bringing in' and 'going global.'
However, some argue that 'China no longer needs foreign investment as before.' Some Western media have even hyped up their narrative that 'China is no longer welcoming foreign investors.'
Apparently, capital abundance and 'going global' do not mean that China no longer needs foreign investment. In fact, foreign capital remains crucial in China's 'dual circulation' paradigm — the new development pattern that China adopted in 2020, which takes the domestic market as the mainstay while allowing domestic and foreign markets to reinforce each other.
Over the past few years, China has introduced a range of measures for voluntary and unilateral opening up on a larger scale and at a higher level. For instance, it has hosted the China International Import Expo and the China International Supply Chain Expo, reduced negative lists for foreign investment, and granted national treatment to foreign-funded enterprises.
With lower entry barriers, more small- and medium-sized foreign-invested enterprises are entering the Chinese market, which can explain the rapid increase in the number of new foreign-funded enterprises in the country.
Why has the scale of FDI declined?
Industrial investment is a long-term, rational economic decision influenced by multiple factors in the medium and long term. Therefore, fluctuations in investment align with economic patterns.
In the medium term, China has attracted over one trillion yuan ($136.85 billion) each year in foreign investment for three consecutive years since 2021. The large foreign capital inflow has unleashed investment demand in the country, and the drop in foreign direct investment in 2024 falls within normal economic cycles.
From a long-term perspective, global cross-border investment is shifting toward service-oriented and asset-light industries, thereby leading to a periodic discrepancy between the scale of foreign investment in actual use and the number of new foreign-invested enterprises. Currently, around 70 percent of foreign investment in
China flows into the services sector, which is characterized by asset-light business models, thereby significantly impacting the overall scale of foreign investment.
The next 'China' is still China.
How do foreign-invested enterprises view the Chinese market?
'The next 'China' is still China.' This is a sentiment widely shared by global investors.
Today's China is experiencing technological breakthroughs and a talent boom, which have led to a substantial increase in total factor productivity and more added value for the 'world factory.' The huge Chinese market has become a 'global market,' stimulating domestic demand and providing immense opportunities for foreign companies.
Undoubtedly, a constantly developing China with strong growth momentum remains highly attractive to foreign investors. At the same time, in China's highly competitive open market, foreign-funded enterprises must bring their best expertise to secure a foothold.
In recent years, some foreign enterprises that failed to keep up with the changing Chinese market have withdrawn, while more high-tech foreign investors have come in.
Meanwhile, some Western countries have politicized economic and trade issues in recent years, leading to a continuous downturn in global cross-border investment and presenting challenges to China's ability to attract foreign direct investment. The tougher the external environment, the more necessary it is for China to respond to global uncertainties with higher-quality development and higher-level opening up.
As always, China remains firmly committed to opening up and win-win cooperation with foreign investors. No matter what, this remains true: partnering with China means embracing future opportunities, and investing in China is investing in the future.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Arabian Post
an hour ago
- Arabian Post
White Lotus Effect Fails to Revive Thailand Tourism
Thailand's tourism industry continues to grapple with significant challenges despite the temporary surge in visitor interest linked to the popularity of HBO's hit series set on Koh Samui. The so-called 'White Lotus effect' sparked a modest increase in Western tourists drawn by the picturesque island backdrop of the show. However, this spike has failed to reverse the broader downward trend that has gripped the sector, which remains weighed down by a complex mix of economic, geopolitical, and structural factors. Tourism, which historically accounted for approximately 20% of Thailand's GDP, has not rebounded to pre-pandemic levels. The government's ambitious targets for visitor arrivals have consistently fallen short, with numbers lagging due to a combination of diminished demand from key markets, lingering travel restrictions in some regions, and competition from neighbouring countries aggressively courting tourists with attractive packages and incentives. Koh Samui, often portrayed as a tropical paradise in the series, experienced an influx of curious travellers eager to visit the filming locations. Hotels and local businesses reported short-term gains, but these have proven insufficient to restore the overall health of the industry. Analysts note that the White Lotus effect highlights the growing influence of media and entertainment in shaping travel preferences but also underscores the limitations of relying on such ephemeral boosts without broader strategic support. ADVERTISEMENT The pandemic fundamentally altered global travel behaviours, accelerating trends towards more cautious spending and preference for less crowded destinations. Additionally, the economic slowdown and inflationary pressures in Western countries have tightened discretionary budgets for leisure travel, further curbing outbound flows. Thailand, which relies heavily on long-haul visitors from Europe, North America, and Australia, has thus found itself at a disadvantage amid shifting global economic dynamics. Geopolitical tensions in Southeast Asia and stricter visa and entry policies in response to health concerns have deterred potential visitors. While Thailand has progressively eased COVID-19 restrictions, some travellers remain wary of changing regulations and the unpredictability of travel protocols. This uncertainty contrasts with competitors like Vietnam and Malaysia, which have implemented more streamlined border policies to attract tourists. The country's tourism infrastructure also faces scrutiny. Despite being a longstanding favourite destination, several regions struggle with overdevelopment, environmental degradation, and inconsistent service standards. These issues have sparked calls for more sustainable tourism practices to ensure long-term viability. Efforts to diversify tourism offerings beyond beach resorts, such as promoting eco-tourism, cultural tourism, and wellness retreats, are gaining traction but require substantial investment and coherent policy frameworks to achieve scale. The Thai government has responded with a series of incentives aimed at reviving the sector. These include marketing campaigns targeting emerging markets such as China, India, and the Middle East, where outbound travel is expected to grow. Subsidies and financial support for local businesses, infrastructure upgrades, and training programmes for hospitality workers form part of the recovery blueprint. Nonetheless, experts caution that the benefits of these measures will manifest gradually and hinge on geopolitical stability and global economic recovery. Tourism operators highlight that the industry's challenges extend beyond attracting visitors to addressing the quality of the visitor experience and the sustainability of growth. For example, concerns about overtourism in some hotspots have led to overcrowding and resource depletion, while lesser-known regions struggle to attract sufficient attention and investment. This imbalance has prompted calls for a more balanced approach that spreads economic benefits more evenly across the country. ADVERTISEMENT Foreign direct investment in the tourism sector remains muted compared with previous years, reflecting broader investor caution about global economic uncertainties. The depreciation of the Thai baht has had mixed effects; while it makes the destination more affordable for foreign tourists, it also raises costs for imported goods and services crucial to the hospitality industry. Inflationary pressures on food, energy, and labour add to the operational challenges faced by businesses seeking to maintain profitability while keeping prices competitive. Labour shortages persist as well, with many workers leaving the tourism sector during the pandemic to pursue alternative employment. This has led to difficulties in maintaining service quality and meeting seasonal demand peaks. The government has encouraged re-skilling and vocational training programmes, but the gap remains significant, especially in rural and less-developed areas. Industry analysts point to the need for a comprehensive long-term strategy that integrates tourism with broader economic and social development goals. This would include embracing digital transformation to enhance marketing, customer engagement, and operational efficiency, as well as fostering partnerships between the public and private sectors to ensure resilience against future shocks. Thailand's brand as a travel destination continues to enjoy global recognition for its natural beauty, rich culture, and culinary appeal. However, sustaining this reputation requires ongoing adaptation to evolving traveller expectations, global trends, and environmental imperatives. While the White Lotus series has brought some renewed attention to specific locales, the industry's recovery depends on deeper structural reforms and coordinated efforts at multiple levels.
Gulf Today
10 hours ago
- Gulf Today
Claudia Sheinbaum's party likely to dominate Supreme Court
Cassandra Garrison, Reuters Judges aligned with Mexican President Claudia Sheinbaum's ruling Morena political party are expected to dominate the country's Supreme Court after a vote that critics feared would weaken checks and balances on the executive branch's power. Sunday's unprecedented election will usher in nine Supreme Court justices, reduced from 11 previously appointed by various presidents. Most of those resigned over the judicial reform that spawned the vote and declined to participate in the elections. The voters who turned out — just 13% of the electorate — also chose more than 840 federal judges and magistrates positions, and thousands more at the local and state level. With nearly all votes counted by the end of Tuesday, the reconfigured Supreme Court looked to be dominated by justices affiliated with Morena through political posts. Several were previously endorsed by former President Andres Manuel Lopez Obrador, who pushed through the reform in his final months in office. Lopez Obrador and Sheinbaum — his protégé — argued the reform was necessary to root out corruption in Mexico's flawed judicial system and make it more accessible to citizens. Critics of the reform, one of the most broad-ranging to be attempted in recent years by any country in the Western hemisphere, warned it would remove checks and balances on Morena, undermine democracy and boost powerful drug cartels' ability to influence the judicial system. The elections appear to put Morena, which already holds a majority in both houses of Congress, on the verge of controlling all three branches of Mexico's government. "It seems like the court that is going to form is one that Lopez Obrador always dreamed of having when he was president," said Laurence Pantin, co-coordinator of the Justice Observatory at Tec de Monterrey and director of the civil organization Fair Trial. "The objective, to be clear, was to have a judicial branch submissive to the executive branch," Pantin said. Some experts attribute Lopez Obrador's zeal to overhaul the judiciary to his tense relationship with the Supreme Court during his presidency from 2018 to 2024. The high court was often a roadblock to his policies, including curtailing the power of election authority INE and bringing the National Guard under control of the military. While Lopez Obrador ultimately found ways to accomplish most of his agenda, the Supreme Court served as an important check on his powers, said Gustavo Flores-Macias, a public policy professor at Cornell University. As Sheinbaum seeks to build on his legacy, she is likely to see much weaker resistance from the courts. That could help grease the wheels for her to further empower the armed forces to participate in civilian affairs or brush off procedural constraints on infrastructure projects. Lopez Obrador faced pushback from the court within the energy sector, too. A single-partisan judiciary could make it much easier for the government to circumvent environmental obligations or investor protections under the U.S.-Mexico-Canada trade agreement. "The optics are not great," Flores-Macias said. "It's very difficult to envision the Supreme Court serving as any counterbalance on these policies that the president will look to advance, especially with a majority in Congress," he added. While giving Morena a free hand to implement its agenda in the coming months and years, the stacking of the court with allies could also rob Sheinbaum and her party of one of Lopez Obrador's favorite scapegoats for his setbacks, Flores-Macias said. Sheinbaum heavily promoted the elections leading up to the vote, calling them an example of a strong democracy, in which judges and magistrates could answer to the people. But the low turnout has already prompted threats of legal challenges by the opposition. Alejandro Moreno, leader of the opposition Institutional Revolutionary Party, called for the election results to be annulled, blasting the vote as a "farce" that had "nothing to do with democracy." "We will be heading towards an authoritarian government, a dictatorship, and these people from Morena don't care," Moreno said in a press conference on Monday. While justices on the prior high court who were appointed by other presidents resigned over the reform, Lopez Obrador appointees like Yasmin Esquivel Mossa and Loretta Ortiz Ahlf were on the ballot and appear to have secured posts in the elections. Despite the dangers of single-party domination, the new court's diversity could have some positive effects. Another Morena-backed candidate, indigenous rights defender Hugo Aguilar, is leading in the race to head the reconfigured court, a choice which could benefit Mexico's underserved indigenous populations, Pantin said. "It could have a positive aspect because there wasn't much diversity within the court and there hadn't been anyone of indigenous origin on it in recent years," Pantin said.
Gulf Today
10 hours ago
- Gulf Today
Sharjah and China strengthen cooperation and partnership
Sharjah Asset Management, the investment arm of the Government of Sharjah, has concluded a strategic visit to the People's Republic of China. The visit aimed to strengthen international cooperation and expand partnership opportunities between the two countries in the areas of research and development, knowledge exchange, and the exploration of promising opportunities in new sectors. This initiative is part of the broader efforts to enhance bilateral relations between the UAE and China and contribute to driving sustainable development in the Emirate of Sharjah. During the visit, Sharjah Asset Management signed a Memorandum of Understanding (MoU) with (CICC), in the presence of Sheikh Saud Bin Mohammed Al Qasimi, Deputy Chairman of Sharjah Asset Management; Omar Al Mulla, CEO Ossol Investment; Saeed Sharar, CEO Ossol investments; along with a group of CEOs and directors from Sharjah Asset Management, and a delegation representing the Bank of China. Sheikh Saud Bin Mohammed Al Qasimi, stated:'This agreement marks a new starting point for a fruitful collaboration with CICC. This partnership will open new horizons for research, investment, innovation, and the exchange of expertise and knowledge between both parties. It will also pave the way for meaningful achievements across key sectors such as finance, technology, and sustainable development, ultimately contributing to long-term economic progress.' A spokesperson from (CICC) affirmed that the partnership with Sharjah Asset Management reflects the company's commitment to strengthening Acooperation between China and the UAE, and to exploring new opportunities that this partnership offers—particularly in the fields of research and development. 'By leveraging our mutual strengths, we can address challenges and seize opportunities within our respective markets, while expanding our reach across regional and international markets,' the spokesperson stated. The Memorandum of Understanding outlines a joint commitment to collaborate on innovative research projects aimed at delivering practical and sustainable solutions that benefit both the Emirati and Chinese economies. It further seeks to enhance growth opportunities in vital sectors such as technology, financial services, environmental sustainability, and sustainable investment strategies. The MoU establishes a solid framework for joint research initiatives designed to foster innovative solutions and drive long-term, sustainable growth. The Memorandum of Understanding is expected to result in a series of joint initiatives, including the organization of specialized workshops and seminars, as well as the implementation of applied research projects that align with the strategic priorities of both parties. The focus will be on sustainable investment practices and innovative solutions that generate long-term economic benefits. This partnership reflects the shared vision of both sides to enhance international cooperation, achieve sustainable economic growth, and build strong strategic relationships. It lays the foundation for future partnerships that will further strengthen the economic ties between China and the United Arab Emirates. The company's delegation visited 23 leading Chinese companies across various key sectors to explore investment and cooperation opportunities. Among the visits were the Beijing Opera House and Stadium, accompanied by the Dafa Industrial Group. The delegation also explored the latest LiDAR technologies by 'Seyond', a leader in this advanced field, and examined promising investment opportunities and applications in the automotive and transportation sectors. During visits to ' and ' the delegation was introduced to potential collaboration in the fields of artificial intelligence, autonomous mobility, and robotaxi technology. The delegation also visited 'Ding Dong Limited' in Shanghai, a company specializing in the delivery of fresh foods, where they explored best practices in logistics, warehouse management, facilities management, and e-retail. Additionally, they visited 'H World Group', which operates over 11,000 hotels across 19 countries, to gain insights into hotel operations and discuss potential expansion and partnership opportunities in the Emirate of Sharjah. The UAE and China enjoy strong economic and trade relations, with China being the UAE's largest trading partner and the UAE remaining China's largest partner in the Middle East and North Africa region. Nearly 15,500 Chinese companies have operated in the UAE markets so far. Separately, Ras Al Khaimah Economic Zone (RAKEZ) recently concluded a multi-city business mission across China, further solidifying its role in advancing UAE-China trade and investment relations. The delegation participated in several high-level B2B engagements, the prestigious 'UAE – China (Sichuan) Economic & Trade Cooperation Promotion Conference' event, hosted by the Embassy of the UAE in Beijing, as well as the Invest UAE Roadshow in Guangzhou led by the UAE Ministry of Investment. WAM
