Tensions between the two biggest economies in the world have escalated over the past few years.
Florence Law | Reuters
Beijing – China is trying to boost foreign investment amid geopolitical tensions and businesses seeking more concrete action.
According to China’s CNBC translation, authorities announced the “2025 Action Plan to Stabilize Foreign Investment” on February 19, making foreign capital easier to invest in the domestic telecommunications and biotechnology industry.
The document called for the development of clearer standards in government procurement (a major problem for foreign companies in China) and plans to gradually allow foreign investment in the education and culture sectors.
Jens Eskelund, chairman of China’s European Union Chamber of Commerce, said in a statement Thursday.
The Chamber of Commerce noted that China has already mentioned plans to open communications, healthcare, education and culture to foreign investment. To make public procurement requirements more clear is “notably positive,” the Chamber of Commerce said, and foreign countries that have invested heavily in localizing production in China “if fully implemented” He said it could benefit businesses.
China’s latest action plan was announced around the same time that foreign direct investment fell 13.4% in January to 975.9 billion yuan ($13.46 billion). According to official data available through wind information, this comes after FDI plummeted 27.1% in 2024, 8% in 2023, and 8% in 2023.
All regions need to “ensure that all measures will be implemented in 2025 and effectively increase the trust in foreign investment,” the plan states. The Ministry of Commerce and the National Development and Reform Committee – the Economic Planning Agency – have jointly published the plan of action through the Council of State, the government’s executive body.
Commerce Department officials emphasized at a press conference Thursday that the plan of action will be implemented by the end of 2025, with details of subsequent support measures coming into effect soon.
“We are grateful that the Chinese government recognizes the important role foreign companies play in the economy,” said Michael Hart of China’s US Chamber of Commerce in a statement. “We look forward to further discussion on the key challenges our members face and the steps needed to ensure a more level playing field for market access.”
The latest survey of Amcham China members released last month found that record shares are considering or beginning to source manufacturing or procurement diversity from China. A survey from the previous year found that members found it difficult to make money in China than before the Covid-19 pandemic.
Consumer spending in China has been growing at just a single digit low since the pandemic, with retail sales still growing since the pandemic. Meanwhile, tensions with the US escalated as the White House restricted access to advanced technology and imposed tariffs on Chinese products.
“Very strong signal”
Although many aspects of the action plan were publicly mentioned last year, some points are relatively new, such as allowing foreign companies to use domestic loans to buy local stocks, and Junhe said Xiaojia Sun, Law’s Beijing-based partner.
She also highlighted a plan call to support the ability of foreign investors to participate in China’s mergers and acquisitions, saying it could benefit from the overseas list. Sun’s practice covers companies, mergers, acquisitions and capital markets.
The bigger question remains China’s resolve to act on a plan.
“This plan of action is a very strong signal,” Sun said in Mandarin, translated by CNBC. She said she hopes Beijing will continue to implement, saying the release resembles a rare, well-known meeting at the beginning of the week of China’s President Xi Jinping and the entrepreneur.
The gatherings on February 17th included Alibaba founder Jack Ma and Deepshek Leanne Wenfeng. In recent years, regulatory crackdowns and uncertainties about future growth have weakened business trust and foreign investors’ feelings.
China needs to balance tariff retaliation with FDI stabilization, city analysts noted earlier this month.
“We believe that Chinese policymakers will likely be cautious about targeting us. [multinationals] Analysts said that “FDI has come to China, bringing technology and know-how, generating jobs, revenue and profits and contributing to tax revenue,” as a form of retaliation for US tariffs.
Amid a relatively rare approval, Chinese Commerce Ministry officials on Thursday looked at the effects of geopolitical tensions on foreign investment, including some companies’ decisions to diversify away from China. They also pointed out that foreign investment companies contribute nearly 7% of their employment and around 14% of their domestic taxes.
Previously, official commentary from the Commerce Department on the decline in FDI tended to focus solely on most foreign companies being optimistic about China’s long-term outlook.
