Shanghai is an attractive destination for foreign investment and, despite the COVID-19 outbreak, it has seen an increase in FDI. After the new regulations of January 1^st, 2020, the treatment of local and foreign-funded firms operating in China has been almost standardized to that of domestic firms.

Data released at the end of the previous year showed a significant increase in Foreign Direct Investment pouring to China, notably to Shanghai. Here are some of the key changes:

• The contribution of foreign-funded firms in Shanghai has increased from 25% in 2020 to nearly 33% in the first quarter of 2023, according to the 20th National Congress of the Communist Party of China;

• Total foreign direct investment in China climbed by 8% to US$189.13 billion in December 2022;

• Shanghai's utilization of foreign investment was reported to be at US$ 23.956 billion by the end of 2022, a 22% growth since September of the same year;

• The city's real usage of foreign capital in January-February of this year was US$4.961 billion, an 18% rise year on year.

As these figures illustrate, FDI is an important tool for maintaining global supply chain resilience and combating geo-economic fragmentation.

In terms of actual FDI used in the city, the three leading industries were: information transmission, software and information technology services; leasing and business services; and scientific research and technology services.

The top 3 sources of investment for the city of Shanghai were:

• Hong Kong, with US$3.106 billion, rising at 2.6%;

• Singapore, with US$471 million, rising at -24%;

• British Virgin Islands, with US$330 million, rising at 164.7%.

Notwithstanding the current turbulent global business environment, Shanghai and China as a whole remain major engines of global growth. Such circumstances are key for foreign enterprises that want to invest and do business in China.

At PHC Advisory, we can offer you full support on matters regarding doing business in China, or any other issues your business may face in China. If you would like to know more about the policies in China, please contact us at info@phcadvisory.com.