What is the purpose of promoting domestic reinvestment of foreign investment

The period of the 15th Five Year Plan is a crucial period for China to consolidate the foundation and make comprehensive efforts to achieve socialist modernization. Against the backdrop of increasing uncertainty in the external environment, how to transform the advantages of a super large scale market, a complete industrial system, and open policies into a driving force for promoting long-term foreign investment in the Chinese market has become an important issue in China's efforts to stabilize foreign investment. This year's Government Work Report has made arrangements for expanding two-way investment cooperation, proposing to "deepen the reform of the system and mechanism for promoting foreign investment, ensure national treatment for foreign-funded enterprises, implement a new version of the Catalogue of Industries Encouraging Foreign Investment, promote domestic reinvestment of foreign investment, and expand localized production". This indicates that China's efforts to stabilize foreign investment are shifting towards stabilizing stock, expanding quantity, and improving quality, and promoting domestic reinvestment of foreign investment has become an important lever for deepening the integration of foreign investment into China's high-quality development process during the 15th Five Year Plan period.

Foreign investment is an important carrier for host countries to connect with global capital, technology, markets, and industrial networks. It can not only introduce capital investment to the host country, but also promote economic structural optimization through technology diffusion, industrial matching, employment creation, and competitive effects. Especially for China, which is at a critical stage of vigorously promoting high-quality development, the role of foreign investment is no longer limited to filling the funding gap, but more reflected in promoting industrial upgrading, strengthening innovation capabilities, enhancing the depth of embedding in the global industrial chain and supply chain, and the level of open economic development. Foreign domestic reinvestment refers to foreign-funded enterprises continuing to use the profits earned from operating in the host country to expand local production, establish new projects, increase capital and shares, invest in research and development, or build supporting industrial chains, rather than remitting all of them back to their home country or overseas headquarters. As an important component of foreign direct investment, domestic reinvestment of foreign capital not only reflects the confidence of foreign-funded enterprises in the market prospects, institutional environment, and development potential of the host country, but also means their transformation from short-term operation to long-term rooting.

Why is there such a strong emphasis on domestic reinvestment by foreign investment at present?

This is a practical need for China to cope with the increasing uncertainty of the global trade and investment environment and consolidate the basic foundation of foreign investment. In 2025, there will be 70392 newly established foreign-invested enterprises in China, a year-on-year increase of 19.1%, but the actual amount of foreign investment used will be 747.69 billion yuan, a year-on-year decrease of 9.5%. The increase in the number of enterprises and the pressure on capital scale indicate that although the Chinese market is attractive, foreign investment decisions are more cautious. At the international level, data from the United Nations Conference on Trade and Development shows that global foreign direct investment will increase by 14% in 2025, but a significant portion will come from the flow of funds from global financial centers. The expansion of physical investment is weak, and the number of newly established green investment projects will decrease by 16%. This means that in the context of insufficient global productive investment and intensified competition for high-quality cross-border capital, stabilizing foreign investment cannot rely solely on the introduction of new projects, but should also pay attention to the existing stock foundation and reinvestment potential of foreign-funded enterprises in China, and transform the existing operating foundation of foreign-funded enterprises in China into sustained momentum for long-term deep cultivation of the Chinese market.

This is an effective way to enhance the comprehensive contribution of foreign investment to China's economic development. Foreign funded enterprises are not only capital suppliers, but also important carriers for job creation, technology diffusion, management upgrading, and international market connectivity. Since the reform and opening up, foreign-funded enterprises have contributed one-third of China's imports and exports, one-quarter of its industrial added value, and one seventh of its tax revenue, creating over 30 million job opportunities. From 2014 to 2024, the R&D investment of foreign-funded industrial enterprises above designated size in China increased by 86.4%, and the number of effective invention patents increased by 336%. Therefore, encouraging foreign-funded enterprises to continue using their profits in China for capital increase, production expansion, research and development innovation, and industrial chain support is not simply about "keeping" the funds, but promoting the continued rooting, diffusion, and upgrading of factors such as capital, technology, management, talent, and market channels in China.

This is the key path to optimizing the structure of foreign investment and improving the quality of utilizing foreign investment. By 2025, the actual use of foreign investment in China's high-tech industry will reach 241.77 billion yuan, with the actual use of foreign investment in e-commerce services, medical equipment and device manufacturing, and aerospace and equipment manufacturing increasing by 75%, 42.1%, and 22.9% respectively. This indicates that although the overall actual scale of foreign investment usage has fluctuated, high-tech, high value-added, and emerging service sectors still have strong attractiveness. Guiding foreign-funded enterprises to invest more of their profits in advanced manufacturing, modern services, digital economy and other fields in China will help promote the better integration of foreign investment into China's modern industrial system construction and serve the development of new quality productivity.

This is an important support for enhancing the resilience of China's open economy and improving high-level opening efficiency. Compared to new investments entering the Chinese market for the first time, foreign-funded enterprises already operating in China are more familiar with the Chinese market, industrial supporting facilities, institutional environment, and consumer demand. Their reinvestment usually has the characteristics of shorter decision-making chains, faster project implementation, and deeper industrial embedding. Promoting domestic reinvestment of foreign capital can help better integrate into China's economic and social development, achieve common development through mutual benefit and win-win, and transform foreign-funded enterprises from general market participants into co builders and beneficiaries of China's high-quality development.

Promoting domestic reinvestment of foreign capital stabilizes the basic stock of foreign investment, activates the potential for stock development, and enhances the resilience of China's open economy. To truly transform domestic reinvestment of foreign capital into a driving force for high-quality development in China, the key lies in forming a more stable, efficient, and attractive investment ecosystem around the full process demand of "confidence before investment, convenience during investment, and returns after investment" for foreign-funded enterprises, thereby enhancing the endogenous driving force for foreign-funded enterprises to root in China, layout in China, and grow in China.

To address this, we need to enhance our full cycle service capabilities. To promote domestic reinvestment of foreign capital, it is necessary to pay attention to both the initial investment matching and the continuous service after the enterprise is established, and to respond promptly to specific problems encountered by enterprises in expanding production, technological transformation, establishing research and development centers, and laying out regional headquarters. Especially for foreign-funded enterprises with a good business foundation and strong willingness to reinvest, precise communication and tracking services should be strengthened to promote better matching between policy supply and enterprise demand. Secondly, we need to enhance the supporting capabilities of the industrial chain and the supply of scenarios. Each region should base itself on its own industrial foundation and comparative advantages, and focus on key directions such as advanced manufacturing, modern services, green and low-carbon, providing more industrial synergy, technology application, and market expansion scenarios, so that foreign-funded enterprises can continuously explore growth space in the process of integrating into China's industrial upgrading, and further enhance their confidence and willingness to continue to deeply cultivate the Chinese market. We need to strengthen the expectation of stable and transparent systems. For multinational corporations, reinvestment depends not only on short-term returns, but also on their judgment of the future institutional environment. We need to continuously improve policy continuity, rule transparency, and implementation consistency, and create a more fair and predictable market environment in areas such as market access, intellectual property protection, standard setting, and government procurement, so that foreign-funded enterprises can operate with peace of mind and continue to layout.