Foreign direct investment in China continues to grow, painting a different, if upbeat, picture from the widespread perception that geopolitical and supply-chain concerns have diminished the giant market’s appeal.

Data from China's State Administration of Foreign Exchange (Safe) reveal that the country's international balance of payments remained largely stable in 2023.

A total of 53,766 foreign-invested enterprises were established in the country last year, up 39.7% from 2022, reflecting strong confidence among foreign investors in the Chinese market. Furthermore, China's actual use of foreign capital reached 11.3 trillion yuan (US$1.57 trillion), a historical high.

According to statistics from China's Ministry of Commerce, investments from France and the United Kingdom showed the biggest year-on-year growth at 84.1% and 81.0% respectively, while investments from Australia rose 17.1%.

However, direct investment liabilities in China’s balance of payments amounted to US$33 billion last year, according to Safe. The measure, which accounts for monetary flows related to foreign-owned entities in the country, was down 82% compared with the 2022 level and marked the lowest annual figure since 1993.

Cross-border capital flows have stabilized, with the overall FDI maintaining a net inflow pattern despite a net outflow in Q3 2023.

A survey conducted by the China Council for the Promotion of International Trade finds that over 90% of foreign-funded enterprises expect the profitability of their investments in China to remain stable or increase over the next five years.

There has been a steady increase in foreign interest in investing in the Chinese market and allocating renminbi assets, according to a Safe spokesman.

Foreign holdings in Chinese domestic bonds have risen in recent months. In December, there was a net increase of US$24.5 billion, maintaining the high level seen over the past two years. November also saw the second-highest net increase in history. The inflows came from multiple channels, with trade in goods being a significant driver.

Meanwhile, China's outbound investment has been increasing. Data from the Ministry of Commerce show that total outward direct investment (ODI) reached 1.04 trillion yuan in 2023, up 5.7% from the previous year (equivalent to US$147.85 billion, a 0.9% growth).

With its ODI relatively smaller compared with the FDI, China's outward investment still has significant room for growth, according to a recent report from China International Capital Corporation.