China Reports Surge in New Foreign Firms Amidst Shifting Investment Landscape

New Foreign Firms Flourish Despite Overall FDI Dip

Beijing, China – China recorded a significant increase in the number of newly established foreign-invested enterprises during the first nine months of 2025, with 48,921 new firms registered, marking a 16.2% year-on-year rise. This data, released by the Ministry of Commerce (MOFCOM), indicates a continued interest from international businesses in establishing a presence in the Chinese market. However, this growth in new entities contrasts with a 10.4% year-on-year decrease in the actual foreign direct investment (FDI) inflow, which totaled 573.75 billion yuan (approximately 80.89 billion U.S. dollars) over the same period.

Despite the overall decline in FDI, a notable rebound was observed in September alone, with FDI rising by 11.2% year-on-year.

Sectoral and Regional Investment Highlights

The investment landscape reveals a strategic shift, with foreign capital increasingly flowing into high-value and advanced sectors. During the first three quarters of 2025, the manufacturing industry attracted 150.09 billion yuan in actual FDI, while the services sector drew a larger share of 410.93 billion yuan.

High-tech industries emerged as a particularly strong magnet for foreign investment, securing 170.84 billion yuan. Within this segment, specific areas experienced substantial growth:

• E-commerce services surged by 155.2%.
• Aerospace and equipment manufacturing rose by 38.7%.
• Medical equipment and device manufacturing increased by 17.0%.

Regionally, several countries significantly boosted their investment in China:

• Investment from Japan surged by 55.5%.
• The United Arab Emirates (UAE) saw an increase of 48.7%.
• The United Kingdom's investment rose by 21.1%.
• Switzerland's investment grew by 19.7%.

Driving Factors and Policy Responses

The increase in new foreign-invested firms can be attributed to several factors, including China's robust economic performance, sophisticated supply chain systems, and improving business environment. Proactive government policies, such as expanding the 'Catalogue of Encouraged Industries for Foreign Investment' to include advanced manufacturing, green technology, and services, and trimming the 'Negative List' for foreign investment, have played a crucial role. The establishment of Free Trade Zones (FTZs) and the Hainan Free Trade Port also offer significant incentives.

Furthermore, China's growing innovation capacity, evidenced by its leadership in PCT international patent applications and high patent filings in generative AI, along with its vast digital economy and e-commerce scale, continues to attract global firms. Companies are also drawn by the country's manufacturing depth, quality, and cost balance, as well as opportunities in the green transition, including new energy vehicles (NEVs) and clean tech supply chains.

The decline in overall FDI inflow is contextualized by global economic uncertainty and shifts in global supply chains, with some Western countries promoting 'de-Chinaization' trends. Tighter global financial conditions and interest rate differentials have also contributed. However, analyses suggest that the fall in FDI does not indicate a mass exodus, but rather a concentration of investment in specific, high-growth sectors, while traditional sectors like real estate and retail have seen declines.

In response, MOFCOM has pledged to further stabilize foreign investment in 2025, expand market access, and enhance the business environment, including holding 'Invest in China' activities to attract more foreign capital.