China FDI Sinks 10.8% in Q1
Foreign direct investment (FDI) in China dropped by 10.8% year-on-year to approximately $36.9 billion during the first quarter of 2025. This decline comes on the heels of a significant 27.1% fall in 2024, marking the most pronounced decrease in FDI since records began in 2008. The ongoing downturn reflects diminishing foreign confidence in major projects within China's economy, driven by concerns over a deflationary spiral and the perception that the government has been slow to enact stimulus measures. This apprehension has been further exacerbated by the looming threat of tariffs from the United States. Additionally, the lack of transparency in the financial statements of both manufacturing and service sectors has contributed to foreign investors' uneasiness. However, recent indications of economic support from the government and potential easing of the Chinese Communist Party's stringent control over the tech industry have uplifted investor sentiment regarding portfolio investments in China. These developments may pave the way for an increase in direct investments as the year progresses.
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