Commentary: The actual use of foreign capital has decreased. Has foreign capital "withdrawn" from China?

According to data from the Ministry of Commerce, from January to July 2026, 37711 foreign-invested enterprises were newly established nationwide, a year-on-year increase of 4.4%; The actual amount of foreign investment used was 438.33 billion yuan, a year-on-year decrease of 6.2%. On one hand, the number of newly established foreign enterprises continues to increase, while on the other hand, the actual use of foreign capital has decreased. At first glance, this seems contradictory and can easily be used to hype up the narrative of "foreign capital leaving China". But does the decrease in actual use of foreign capital mean that foreign capital is "withdrawing"? To answer this question, we cannot just focus on a total number, but also look at where foreign investment comes from and where it is directed.

The "actual use of foreign capital" refers to the actual amount of foreign capital received over a period of time, which is particularly susceptible to factors such as the pace of large-scale project implementation, corporate financing arrangements, and the high or low initial base. The withdrawal of foreign-funded enterprises means shutting down their businesses, withdrawing capital, personnel, and industrial chains, and completely abandoning the Chinese market. These two are not the same thing at all. Moreover, the number of newly established foreign-funded enterprises in China continued to grow in the first seven months of this year. If the Chinese market really loses its appeal, why are there still so many foreign-funded enterprises registering in?

More noteworthy than the total amount is that foreign investment is undergoing a profound structural transformation. In the first seven months of this year, the actual use of foreign investment in China's high-tech industry was 182.31 billion yuan, a year-on-year increase of 32.7%, accounting for 41.6% of the country's actual use of foreign investment. Among them, R&D and design services grew by 72.1%, technology transfer services grew by 62.2%, and the electronic and communication equipment manufacturing industry grew by 39.9%. In other words, while the actual use of foreign investment in the country has decreased by 6.2%, the attraction of foreign investment to high-tech industries is growing at a rate of over 30%. This is not foreign capital withdrawing, but foreign capital finding a new position in the Chinese market.

In the past, multinational companies mainly valued cheap labor and low land costs when coming to China, treating China as a processing and manufacturing factory. It's different now. A complete industrial chain, a large team of engineers, rapidly iterating application scenarios, and constantly expanding mid to high end markets are the new chips that attract foreign investment. The way foreign investment enters China is also changing. Previously, it was about opening processing plants and establishing sales networks, but now it is more about building research and development centers, building innovative platforms, and setting up high-end production bases. Foreign investment values not only "cheaper production in China", but also "faster research and development, faster validation, and faster scale formation in China".

From the perspective of origin, foreign investment's interest in the Chinese market is far from diminishing. In the first seven months of this year, Saudi Arabia's actual investment in China increased by 343.7%, France increased by 36.1%, and South Korea increased by 15.8%. These countries are at different stages of development and come from different regions, but they are all increasing their investment in China, indicating that the attractiveness of the Chinese market is not built on a few countries or industries. Saudi capital is seeking opportunities for energy transformation and industrial diversification, French companies value cooperation in consumption, manufacturing, and green industries, while South Korean companies are closely tied to China's electronics, automotive, and advanced manufacturing industry chains. The logic behind their increased investment in China is simple: capital will eventually flow to places with complete industrial foundations, broad market space, and long-term returns.

The above changes are based on the market opportunities of China's continuous expansion, which cannot be separated from China's continuous opening up and exploration at the institutional level. In recent years, China has relied on high-level platforms for opening up to the outside world such as the Free Trade Zone and Hainan Free Trade Port, continuously carried out pilot practices for foreign investment opening, continuously reduced the negative list of foreign investment access, optimized foreign investment services, improved foreign-related economic and trade rules, continuously improved the market-oriented, rule of law, and international business environment, and enhanced the confidence and willingness of foreign investment in China.

The report from the American Chamber of Commerce in China this year shows that 52% of surveyed companies list China as one of the top three investment destinations globally, and 57% of respondents plan to increase their investment in China. In addition, reinvestment by foreign-funded enterprises is also increasing. According to data from the Ministry of Commerce, in the first five months of this year, the reinvestment of foreign enterprises' profits in China increased by 35% year-on-year, reflecting the continued optimism of multinational enterprises towards the Chinese market.

Attracting foreign investment has never been a simple digital competition. Observing China, a super large scale economy undergoing deep transformation, one cannot measure new changes with an "old ruler". Nowadays, there are more newly established foreign-funded enterprises, and multinational corporations are placing more research and innovation links in China. The growth of foreign investment absorbed by high-tech industries is faster, which cannot be explained by the "foreign capital withdrawal theory".

To be precise, China's attraction of foreign investment is undergoing a "shift" rather than a so-called "withdrawal". Today's China is not only a popular destination for global capital seeking markets, but also an important innovation field for global enterprises to face the next round of industrial transformation.