In an era of geopolitical shifts and economic uncertainties, China continues to draw global enterprises despite headwinds. From January to September 2025, the country welcomed 48,921 newly established foreign-invested enterprises—a robust 16.2% increase year-on-year—signaling renewed confidence in its market potential. While actual foreign direct investment (FDI) dipped 10.4% to 573.75 billion yuan ($80.57 billion) over the same period, September alone saw an 11.2% surge, hinting at stabilization and targeted growth in key sectors.
China’s allure for multinational corporations stems from a blend of structural advantages, policy reforms, and evolving market dynamics. Even as some firms diversify supply chains amid U.S.-China tensions, many are doubling down on China for long-term gains. Here’s a breakdown of the primary drivers:
Unparalleled Market Access and Consumer Boom
China’s 1.4 billion consumers represent the world’s largest unified market, with rising incomes fueling demand across sectors. In 2025, lower-tier cities are emerging as hotspots, driving steady purchases of apparel, beauty products, home goods, and premium foods. Social commerce platforms amplify this, enabling brands to tap into personalized, high-volume sales. For instance, e-commerce services saw FDI surge by 155.2% in the first nine months of 2025, underscoring the sector’s explosive potential.
Robust Supply Chains and Infrastructure
Global companies value China’s integrated ecosystem, where suppliers, logistics, and manufacturing hubs operate seamlessly. Despite diversification trends, the country’s sophisticated infrastructure—bolstered by high-speed rail, ports, and digital networks—remains unmatched for efficiency. This is particularly appealing for industries like electronics and automotive, where proximity reduces costs and speeds up production.
Government Incentives and High-Tech Focus
Initiatives like “Made in China 2025” have propelled the nation toward leadership in advanced manufacturing, offering tax breaks, R&D subsidies, and eased market access. FDI in high-tech sectors reached 170.84 billion yuan in early 2025, with aerospace equipment manufacturing up 38.7% and medical instruments rising 17%. The 2025 Action Plan for Stabilizing Foreign Investment further expands opportunities in services and manufacturing, including reduced barriers for foreign ownership.
Strategic Investments from Key Partners
Investments from Japan (up 55.5%), the UAE (48.7%), the UK (21.1%), and Switzerland (19.7%) highlight diversified inflows, focusing on services (410.93 billion yuan) and manufacturing (150.09 billion yuan). These reflect confidence in China’s role as a gateway to Asia-Pacific growth.
Overall, while first-half 2025 FDI fell 13.4% to 467.34 billion yuan, the uptick in new enterprises and sector-specific booms indicate selective, high-value relocations rather than broad exodus.
Is China Really Creating the World’s Most Profitable Business Environment ?
China’s profitability narrative is compelling yet nuanced. On one hand, it offers cost efficiencies and scale that few markets match; on the other, regulatory hurdles and external pressures temper returns. Let’s analyze the evidence.
The Case for Profitability
- Economic Resilience and Growth: China’s GDP expanded 4.8% year-on-year in Q3 2025, on track for a 5% annual target, outpacing many developed economies. Projections for full-year growth hover around 4%, driven by high-tech and consumer sectors.
- High Profit Margins for Many Firms: In 2024, 71% of surveyed foreign businesses in China reported profitability, up from 66% the prior year—a trend likely continuing into 2025 amid stabilizing FDI. Low labor and operational costs, combined with innovation incentives, yield strong ROI in manufacturing and services.
- Sectoral Wins: High-tech FDI’s 170.84 billion yuan inflow reflects bets on future-proof industries like e-commerce and biotech, where returns can exceed 20% annually due to rapid adoption.
The Challenges and Counterpoints
- Declining Overall FDI: Actual inflows dropped 10.9% in January-April 2025 to 320.8 billion yuan, continuing a 2024 slide of 27.1% to $114.8 billion USD. Geopolitical risks, including U.S. tariffs, have prompted 47% of U.S. firms to redirect investments to Southeast Asia.
- Regulatory and Market Barriers: Despite openings, China ranks among the most closed major economies, with uneven enforcement and data localization rules eroding trust. Profitability varies by sector—tech thrives, but real estate lags.
- Global Comparison: While China’s scale boosts revenues, profitability per capita trails leaders like Singapore or Ireland. However, for volume-driven giants like Apple or Tesla, China’s ecosystem delivers unmatched absolute profits.
Verdict: China isn’t unequivocally the “most profitable” globally—profitability depends on sector and risk tolerance—but it excels for high-volume, tech-oriented firms. The September 2025 FDI rebound suggests improving conditions, making it a top contender for strategic relocations.
Who Are the People Behind China’s Foreign Investment Push?
China’s pro-FDI stance is orchestrated by a blend of top leadership, ministerial experts, and regional envoys. Their vision emphasizes openness while prioritizing national priorities.
- Xi Jinping, President and General Secretary: As the architect of the Belt and Road Initiative (BRI)—which has funneled over $1 trillion into global infrastructure since 2013—Xi champions “economic globalization” to position China as an investment magnet. His directives underpin the 2025 Action Plan, promoting high-quality FDI in strategic sectors.
- Wang Wentao, Minister of Commerce: Leading the Ministry of Commerce (MOFCOM), Wang has been pivotal in 2025 engagements, including dialogues with U.S. business councils and calls for diversified strategies amid trade frictions. Under his tenure, MOFCOM released key reforms easing foreign access and tax incentives, directly boosting new firm registrations.
- Supporting Figures: Vice Minister Li Chenggang oversees operational FDI policies, while regional governors in hubs like Shanghai and Guangdong tailor incentives. The State Council’s inter-ministerial committee ensures alignment with the 14th Five-Year Plan, targeting $708.73 billion in cumulative FDI since 2021.
These leaders blend diplomacy with pragmatism, fostering an environment where FDI aligns with China’s self-reliance goals.
Are China’s FDI Facts Accurate?
Skeptics often question whether China’s FDI figures are inflated for promotional effect. A closer look reveals a transparent, if selective, picture backed by consistent reporting.
Evidence of Accuracy
- Official Stats Align with Independent Verification: MOFCOM’s 2025 data—such as the 16.2% rise in new enterprises and high-tech surges—mirrors reports from global bodies. For example, UNCTAD’s World Investment Report notes China’s inflows at $163.2 billion in 2023 (down 13.6%), with 2025 trends showing similar declines in value but gains in volume. Balance-of-payments data confirms net inflows fell to $51.3 billion in 2023 but stabilized in early 2025.
- Sectoral Granularity: Detailed breakdowns (e.g., 155.2% e-commerce growth) are cross-verified by industry trackers, reflecting real shifts toward tech over traditional manufacturing.
- Historical Consistency: Since the 2019 Foreign Investment Law, reporting has improved, with WTO reviews in 2024 affirming slower but steady FDI growth.
Addressing the “Stunt” Narrative
While promotional campaigns highlight positives (e.g., new firm counts), declines are openly reported—10.4% in 2025’s first nine months, 27.1% in 2024. This candor counters stunt claims; instead, it underscores genuine policy responses like the 2025 reforms to counter outflows. World Bank updates echo this, noting modest FDI recovery amid broader economic stabilization.
In short, the facts are accurate reflections of a maturing market, not mere hype—though emphasis on highs may amplify perceptions of unbridled success.
China’s Evolving Appeal
As 2025 unfolds, China’s blend of massive scale, policy savvy, and high-tech momentum keeps it a prime destination for global companies, even amid profitability debates and data scrutiny. With leaders like Xi Jinping and Wang Wentao steering reforms, and verifiable upticks in key metrics, the move to China isn’t a gamble—it’s a calculated play on enduring opportunities. For executives eyeing expansion, the question isn’t if China, but how to leverage its unique edge. Stay tuned as Q4 data could cement this resurgence.
