Foreign direct investment into China continued to weaken in 2025, offering another signal of how the country’s economic trajectory is being reshaped by slowing growth, fragile confidence, and an intensifying tariff war with the United States.
Data released on Friday by China’s Ministry of Commerce showed that foreign direct investment totaled 693.2 billion yuan ($98.46 billion) between January and November, a 7.5% decline from the same period last year. The drop adds to mounting evidence that global capital remains cautious about China, even as Beijing pushes to stabilize growth and reassure overseas investors.
The headline number masks sharp divergences beneath the surface. Investment from Switzerland surged 67% during the period, while inflows from the United Arab Emirates jumped 47.6%. British investment rose 19.3% year-on-year. For November alone, FDI inflows were up 26.1% from a year earlier, suggesting that some investors are selectively increasing exposure, rather than exiting China altogether.
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Still, economists say these gains are narrow and do little to offset broader headwinds facing the Chinese economy in 2025.
China entered the year under renewed pressure from trade tensions with the United States after President Donald Trump expanded and reintroduced sweeping tariffs on Chinese exports, targeting sectors ranging from electric vehicles and batteries to steel, solar equipment, and consumer electronics. The higher duties have added to uncertainty for exporters and manufacturers, many of whom were already grappling with weak global demand and thinner margins.
Export growth has slowed as a result, undercutting one of the few remaining engines of China’s post-pandemic recovery. Manufacturers have responded by shifting parts of their supply chains to Southeast Asia, Mexico, and South Asia, reducing new foreign investment commitments inside China even as existing operations continue to run.
At home, the economy has struggled to gain momentum. Consumer spending remains subdued, youth unemployment is elevated, and the property sector continues to drag on growth, with developers facing tight financing conditions and falling home sales. Local governments, heavily reliant on land sales, are under fiscal strain, limiting their ability to stimulate activity through infrastructure spending.
Against this backdrop, Beijing has leaned more heavily on industrial policy and state-led investment to support growth, prioritizing advanced manufacturing, semiconductors, green energy, and electric vehicles. Some of the stronger FDI inflows from Switzerland, the UAE, and Britain are widely seen as tied to these strategic sectors, where China still offers scale, technical capacity, and government backing.
Even so, foreign companies remain wary. Multinationals have cited rising geopolitical risk, export controls, data security rules, and concerns about market access as factors shaping investment decisions. The tariff conflict with Washington has reinforced those concerns, increasing the likelihood of further trade barriers and retaliatory measures.
Chinese authorities have stepped up efforts to project stability. Officials have promised equal treatment for foreign firms, stronger intellectual property protection, and measures to ease profit repatriation. Policymakers have also sought to frame China as a long-term investment destination at a time when global growth is slowing, and capital is more risk-averse.
The November rebound in FDI may offer some encouragement, but analysts say it is too early to draw firm conclusions. Much will depend on how the U.S.-China trade dispute evolves in 2026, whether Beijing can restore confidence in the property market, and if domestic demand shows clearer signs of recovery.
Currently, the latest investment data underline a central challenge for China in 2025. The world’s second-largest economy is navigating a more hostile external environment while trying to reset its growth model at home, all as foreign investors become more selective about where and how they deploy capital.