Overseas Direct Investment in China Dropped 73% in the Second Half of 2022

According to Japanese media reports, due to factors such as the deterioration of Sino-US relations and geopolitical tensions, overseas direct investment in Communist China hit an 18-year low in the second half of 2022. The report pointed out that as the U.S. government continues to tighten restrictions on the CCP in the high-tech field, most overseas companies started to abandon their plans to invest in China. According to data from the CCP’s State Administration of Foreign Exchange, in the second half of 2022, the Foreign Direct Investment (FDI) totaled US$42.5 billion in communist China, a year-on-year drop of 73%, the largest drop since 1999; on the other hand, the CCP’s overseas direct investment rose by 21% to US$84.2 billion, with a deficit of US$41.7 billion. This is the first time that the CCP has experienced net investment outflows in five and a half years. The report quoted a survey conducted by the US-China Business Council in June 2022, showing that foreign investment confidence in Communist China is not optimistic, supply chain being the major concern. Since last year, many foreign companies have noticed the trend of “internal decoupling” in response to the risk of leakage of advanced technology and have taken the initiative to separate the supply chains of the Chinese market from non-Chinese markets. After that, the United States imposed several export controls on the CCP, prompting more foreign companies relying on the CCP as their major supply chain to withdraw their investments and turn their production lines to southeastern countries.