China's FDI prospects bright despite US-China tensions

China is poised to see a rise in foreign direct investment (FDI) in its services and advanced manufacturing sectors, according to UBS Wealth Management. This boost is expected despite the ongoing technological tensions with the United States that could limit American investments. Analysts predict that the European Union, ASEAN nations, Brazil, Russia, and India will likely step up their investment efforts, thanks to China’s strategic trade relationships and financial policies like currency swaps.

Despite a recent 9.4% decrease in China’s FDI to CNY 987 billion (USD 138.3 billion) until October, influenced by broader global investment slowdowns and strict US tech sector regulations, there is optimism for a rebound. UBS Wealth Management, in agreement with Deutsche Bank (ETR:) Group, anticipates a resurgence of China’s FDI after the earlier dip this year. These financial institutions foresee a strong annual economic growth for China between 5% and 10.4% over the next five to ten years. The expected growth is attributed to rising mass consumption, green policy initiatives, technological advancements, and industrial upgrading.

Contributing to this positive outlook are key policies such as the expansion of free trade zones, liberalization measures like easing QFII/RQFII rules for trading, and lowering barriers on foreign investment access by revising the negative list. Investments from countries including Canada and France have notably increased during this period, while new foreign enterprise registrations in China have risen by 1.10%. Notably, American direct investment into China has also climbed this year despite broader trends.

China is looking at an annual economic expansion rate of 4-4.5% for the next decade, driven by trends in mass consumption, ecological innovation efforts, and advancements in technology sectors.

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