Greenfield foreign direct investment (FDI) into China hit a historic low in the first six months of 2021, according to preliminary fDi Markets data, beating its previous record low in the first half of 2020.
Only 177 greenfield projects were announced by foreign investors in China between January and June this year, slightly down from the 191 projects over the same period of 2020. This made H1 2021 the worst H1 for greenfield FDI into China on record.
Yet, relative to other destinations post-pandemic and due to its immense market, China comes fifth for greenfield FDI in the first semester of 2021 globally, trailing behind the US, the UK, Spain and Germany.
Over the course of 2020, the government moved to open up certain sectors, while strengthening its screening mechanisms on the basis of national security.
The Foreign Investment Law, which came into effect in January 2020, aimed to improve China's business environment for foreign investors. The government's negative list of restricted sectors was shorter in 2020 and included the removal of restrictions in the life insurance, financial services and automotive sectors.
But in December last year, China’s National Development and Reform Commission announced new details for foreign investment screening on the basis of national security, with most notable implications for technology companies.
The biggest greenfield project recorded by fDi in H1 2021 was Hong Kong-based GCL-Poly Energy Holdings' announcement in March that it will invest $2.78bn into a new factory located in the Chinese province of Inner Mongolia, set to be a joint venture with solar manufacturer Shangji Automation.
In the same month, Taiwanese chip giant Foxconn said it will invest in a new industrial park in Zhoukou, Henan province, to develop and produce key parts for handsets, tablets and laptops, creating up to 30,000 jobs. South Korea-based Hyundai announced it will invest $1bn to build its first overseas hydrogen fuel cells factory in Guangzhou.
In the first six months of 2021, US companies recorded 53 projects, up from 41 last year, while its other big investors, Germany and Japan, recorded 19 and 15 projects, down from 27 and 21, respectively, in H1 2020.
According to fDi Markets, the biggest investments into China by sector remain unchanged: industrial equipment, chemicals, food and beverages, plastics and business services.