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Foreign investments into China slowing down

July 21, 2015

Rising costs and increasingly attractive offers from the country's neighbors means many investors are beginning to shop elsewhere. Meanwhile, the Chinese continue their investment spree overseas.


China attracted $68.4 billion (63.2 billion euros) in foreign direct investments (FDI) in the first six months of 2015, up 8.3 percent from a year earlier, the Commerce Ministry in Beijing reported on Tuesday.

The added inflow was driven by a strong surge in mergers and acquisitions (M&A) by overseas companies. At $13.2 billion, M&A activity more than quadrupled in value, accounting for nearly a fifth of total FDI, up from 4.8 percent the year before.

"With the increase of China's land prices and other costs, many companies are now investing in the country in the form of mergers and acquisitions," said spokesman Shen Danyang.

Investments into China's fast-growing services sector shot up 23 percent in the January-June period.

Hong Kong remains the undisputed leading investor in China, accounting for nearly three-fourths of the six-month total, or some $50.7 billion. Investment from France rose nearly 47 percent to $660 million.

Meanwhile, inflow from former foreign stalwarts dropped sharply. Japan, which has been locked in a territorial dispute with Beijing for months, saw investments in its Asian neighbor down 16.3 percent. Investors from the US retreated even more dramatically, with Tuesday's figures showing a 37.6-percent decline.

Losing steam

Much like the overall economy, FDI is showing signs of losing steam as growth slowed from the previous year-to-date rate of 10.5 percent reported last month, hampered by particularly sluggish figures in June, which saw a mere 0.7-percent year-on-year increase.

Experts attribute the drop-off to rising costs, increased competition from Southeast Asian countries, and concerns over official investigations into foreign companies.

At the same time, Chinese companies continued their foray into foreign markets, spurred by the government's calls to improve international competitiveness and slow the rapid buildup of foreign exchange reserves.

Outbound direct investment (ODI) soared 29.2 percent to $56 billion in January to June, putting 2015 firmly on track to break last year's record of $102.9 - the first time ODI passed the $100-billion mark. If this trajectory continues, ODI could soon draw even with FDI, which drew a total of $119.6 billion in 2014, up 1.7 percent compared to the year before.

pad/hg (AFP, Reuters)

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