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By the end of August 2023, a total of 1,150,000 foreign companies were registered in Mainland China, according to the Official data provided by the Ministry of Commerce (MOFCOM). It should be noted that, except for the other countries, the figure also includes Foreign Direct Investment (FDI) invested from Hong Kong, Macao, and Taiwan. According to the official data, China had established a total of 961,000 Foreign-Invested Enterprises (FIE) until the end of 2018, with the actual use of foreign capital of US $2.1 trillion. In 2019, there were 40,910 foreign-invested enterprises set up in China, with an actual amount of foreign investment of US $141.23 billion, an increase of 2.1% over 2018, ranking second in the world. In 2023, there are 33,154 new foreign-invested enterprises were newly established in China. This represents an increase of 5.8% from the previous year.
| Year | Foreign Direct Investment (USD billions) | Number of Foreign Direct Investment Enterprises |
|---|---|---|
| 2020 | 1443.74 | 1,041,567 |
| 2021 | 1734.84 | 1,075,331 |
| 2022 | 1890.70 | 1,111,567 |
| 2023* | 1950.00 | 1,150,000 |
The majority of foreign companies in China are from Asia, with the top five countries being Japan, South Korea, Singapore, the United States, and Germany. These five countries account for over 60% of all foreign companies in China.
The majority of foreign companies in China are located in the eastern coastal provinces, with the top five provinces being Guangdong, Jiangsu, Zhejiang, Shandong, and Fujian. These five provinces account for over 70% of all foreign companies in China.
The majority of foreign companies in China are engaged in manufacturing, with the top five industries being electronics, machinery, chemicals, textiles, and food processing. These five industries account for over 60% of all foreign companies in China.
The presence of foreign companies in China has had a significant impact on the Chinese economy. Foreign companies have brought in new investment, technology, and management expertise. They have also helped to create jobs and boost exports.
The number of foreign companies in China is expected to continue to grow in the years to come. China is a large and growing market, and foreign companies are eager to tap into this potential.
What is a Foreign Invested Company in China?
A foreign-invested company refers to a Foreign-Invested Enterprise (FIE) established in China in accordance with China Foreign Investment law published in January 2020. FIE can take four structures, including Wholly Foreign-Owned Enterprise (WFOE), Joint Ventures Company (JV), Foreign Liability Limited Company (LLC), and Foreign Partnership Enterprise.
FDI flows in the time of the COVID-19 pandemic
Because of the consequences of the COVID-19 pandemic, the Global FDI declined sharply due to supply disruptions, demand contractions, and the pessimistic outlook of economic actors. According to the 2021 Investment Trends Monitor published by UNCTAD, Global foreign direct investment (FDI) collapsed in 2020, falling 42% from US $1.5 trillion in 2019 to an estimated US $859 billion. For example, in the United Kingdom, FDI fell to zero, and declines were recorded in other major recipients.
Conversely, China succeeded in halting the pandemic spread. Even though the FDI inflows from the US and Europe have dropped, the investment inflows have continued to increase from ASEAN countries.
The new FDI reform comes out
In order to attract further foreign investment, Chinese government has published new reforms to improve FDI, such as establishing a new system for Foreign Invested companies, reducing the negative list, Tax cuts, subsidies for High Tech Industry, etc. According to the China MOFCOM data center, China was ranked the world’s largest FDI of US $163 billion recipients instead of the United States in 2020.
Based on the whole industry chain and low cost, China is an attractive market for foreign investors. In addition, China is the largest recipient in Asia and the leading investing country in terms of FDI outflows. The results show that the number of foreign-invested enterprises will keep on increasing in 2021.
Conclusion
At present, although foreign-invested companies are less than 3% of Chinese companies, they have contributed nearly 50% of the amount of China’s foreign trade, one-quarter of the output value and the profits of the Industrial Enterprises, one-fifth of the tax revenue. According to the Municipal Commission of Commerce in Shanghai, a total of 767 multinational corporations have established regional headquarters in Shanghai by the end of December 2020. Today, Foreign-invested companies have become an important part of China’s economy and are also the foundation of global economic sustainable development.
