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Xiaofei Xu

As China drafts its 15th five-year plan – the next entry in a line of expansive blueprints that have set the tone for the country’s development over more than seven decades – we examine how these documents inform and reflect high-level policy priorities, what to expect in the coming iteration and how foreign investors are likely to be affected.
For more stories in this ongoing series, click here. To view SCMP Plus Factsheets on the 15th five-year-plan and more premium content, click here.
Sun Xueguang has been helping broker China investment deals for years, but a recent meeting with local officials still caught him by surprise.
As the president of a Franco-Chinese start-up incubator organisation, Sun was used to foreign investors being welcomed by local authorities with big smiles and promises of preferential tax policies. But this time, the atmosphere felt different.
Sun was startled by the local cadres’ stricter requirements: they explicitly said they wanted to attract projects in certain strategic sectors, such as pharmaceuticals, healthcare and artificial intelligence.
“The message was clear: they want high-quality foreign investment that can help complete and develop their local supply chain,” said Sun, as he recalled the talks with officials based in the Yangtze River Delta, a prosperous region in eastern China centred around Shanghai.
“The mentality is shifting from quantity to quality.”
Many foreign investors have noted a similar trend as China begins drafting a new five-year plan that is expected to place a heavy focus on driving domestic innovation and harnessing emerging technologies to generate sustainable growth.
While Beijing says it aims to attract more foreign investment and plans to open up more sectors to overseas capital, there is uncertainty in the foreign business community about where they fit into Beijing’s new economic vision.
With China striving to become a global technological leader amid a period of rising geopolitical tension, will foreign investors still be important to Beijing’s agenda? And where will they find opportunities to expand and prosper?
In the next five years, foreign direct investment will remain important but play a declining role
Yuen Yuen Ang, professor
One thing is certain: the days when Chinese officials went all-out to attract foreign investment are over. Unlike in previous decades, Beijing now sees domestic rather than global companies as the key to long-term economic development.
“Today, the hierarchy is reversed,” said Yuen Yuen Ang, professor of political economy at Johns Hopkins University. “In the next five years, foreign direct investment will remain important but play a declining role as the centre of gravity moves decisively towards domestic firms in priority sectors.”
Foreign investment played a vital role in China’s economic take-off after Beijing began embracing market reforms in the late 1970s, helping the country rapidly emerge as a global manufacturing powerhouse.
First came a wave of Hong Kong and Taiwan-invested factories in the 1980s and 1990s. Then Western multinationals swarmed in after Beijing’s accession to the World Trade Organization in 2001.
But the massive inflow of foreign investment to China has started to dry up over the past few years.
In 2024, the world’s second-largest economy attracted 826.2 billion yuan (US$116.2 billion) of foreign investment, down 27.1 per cent year on year and a 32.9 per cent decline from a peak of 1.23 trillion yuan in 2022.
The slide has continued this year: China’s total foreign investment over the first eight months of 2025 reached 506.5 billion yuan, down 12.7 per cent compared with the same period last year.


In recent surveys, members of several foreign chambers of commerce in China have expressed growing pessimism about their prospects in the country as they face rising pressure from multiple sides at once.
Some firms have struggled to maintain profits amid China’s economic slowdown and intense competition from domestic rivals. Others have faced operational difficulties due to US tariffs and tech containment policies targeting China.
European firms have been hit hardest, with only 12 per cent of respondents – a record low – expressing optimism regarding their future profitability in China over the next two years in the European Union Chamber of Commerce in China’s 2025 business sentiment report.
Meanwhile, a record high proportion of members – 49 per cent – expressed pessimism about their prospects in the survey.
“This trend is likely to continue if challenges, including unhealthy, unsustainable competition – often referred to as involution – slow domestic demand relative to production capacity growth, and a narrowing space for foreign-invested companies to compete in sectors deemed strategic, are not efficiently addressed,” said Jens Eskelund, president of the EU Chamber.
“With risks continuing to intensify while returns diminish, investors are beginning to be confronted with the prospect that these challenges may be enduring features of the economy, necessitating a strategic reassessment.”
The EU Chamber is calling for Beijing to introduce a string of policy initiatives to address these challenges in the next five-year plan, including reforms to strengthen market forces, avoid overinvestment and ease external trade tensions, according to a position paper it published in September.
For their part, China’s leaders continue to stress that the country remains very much open for business and welcomes foreign investment.
Beijing had already cut the so-called negative list – referring to the list of industries where foreign investment is restricted – from 122 to less than 30 over the past decade. Now, the country is also taking steps to open up more parts of the telecommunications, financial and healthcare sectors to foreign businesses.
President Xi Jinping and other top officials have repeatedly talked of “high-level opening-up” in their recent speeches and articles, and the buzzword is also likely to feature heavily in the next five-year plan.


Despite China’s recent self-reliance push amid the US trade war, the country really does remain keen to attract foreign investment, especially in certain industries, analysts said.
Local governments – especially those with fiscal problems – need foreign investment to boost employment, which has become a key concern for many grass roots officials amid China’s economic slowdown, according to Alicia Garcia-Herrero, chief economist for Asia-Pacific at the French investment bank Natixis.
Besides, there are still several sectors where China lags behind developed countries in terms of technology and expertise. Chinese officials are particularly likely to court investments from foreign companies in these areas, said Sun, the Franco-Chinese incubator president.
Biotechnology and pharmaceuticals are two such fields. Europe still enjoys a lead due to its decades of investment in research and development, and European firms have been eager to invest in China to tap into the country’s fast-growing pharmaceuticals market.
French pharmaceutical giant Sanofi announced a €1 billion (US$1.17 billion) investment in Beijing to build a new insulin production site in 2024. It has also been spending heavily to purchase licensing rights for the Chinese market, including a US$395 million deal in August for the drug plozasiran.
Healthcare is another sector where the interests of China and foreign multinationals appear aligned. China’s spending on health and social care is expected to soar in the coming decades as the country’s living standards rise and its population rapidly ages.
“Europe has developed a highly specialised healthcare system, with special clinics for psychotherapy, for instance,” Sun said. “As China’s economy further develops, Chinese consumers will certainly want to have good quality health services; this is where Europe can help.”
French nursing home providers including Colisée, Domus Vi and Emeis – known in China as Orpea – have already entered the Chinese market, with the number of people aged 60 and over in China set to rise by 70 million between 2026 and 2030, according to the China Population and Development Research Centre.
Investments will be more tactical and less strategic than in the past
Alicia Garcia-Herrero, Natixis
Chinese companies going abroad, meanwhile, are likely to remain dependent on foreign financial and legal services providers, said Garcia-Herrero.
Other promising areas for foreign investment include nuclear energy, environmental protection and aerospace, where investment by giants like Airbus could help complete China’s domestic aviation supply chain, according to Sun.
However, there is also wariness among some multinationals about making large commitments to the Chinese market, analysts said.
Most foreign companies that already have a presence in China are unlikely to walk away, as China remains a crucial source of sales. But as the recent chamber of commerce surveys indicate, many of them are downbeat about their long-term prospects in the country and unwilling to make big bets on the market.
“Investments will be more tactical and less strategic than in the past,” Garcia-Herrero said. “It will not grow; it will be stagnant.”
The caution does not only stem from China’s recent economic slowdown. Some firms also worry that if they invest in a strategic sector in China, it will simply accelerate the development of domestic players that will eventually outcompete them, analysts said.
A similar pattern has previously played out in a slew of industries – from chemicals to solar power and electric vehicles – where foreign companies have brought products to the Chinese market, only to see domestic rivals quickly catch up and overtake them.
“Companies may say, ‘You know what? It’s fine with me, because I still have five, six, seven years or whatever length of time to make money,’” Garcia-Herrero said. “But everybody knows that in whatever sector China puts its attention to, you are going to be offered a lot, but you know that it’s a countdown.”
We are definitely not walking away from China, absolutely not
European executive
In some sectors, meanwhile, Western companies fear their Chinese competitors may already be ahead of them in terms of know-how and technology.
While negotiating a potential cooperation with a Chinese partner recently, a senior executive at a major French company described having an unsettling realisation.
“I got the feeling that the government was very keen for it to happen, more than the company,” the executive told the Post. “The Chinese company probably felt like we could not bring many new things to the table.”
For now, there is a sense that many foreign businesses simply aim to hold on to what they have in the Chinese market. Despite all the recent challenges, most of them are still making good money in China.
In 2024, 71 per cent of American companies in China made a profit – up 5 percentage points from the previous year, according to the American Chamber of Commerce in China’s annual business climate report. Fifty-seven per cent of companies recorded an increase in profits last year, up 7 percentage points from 2023.
Several European businesses also stressed their goal was to stay in and adapt to the Chinese market. That included firms in sectors where foreign businesses have struggled in recent months, such as automotive and luxury goods.
“China’s latest GDP growth number was above 5 per cent – that is still four times higher than the euro zone. China remains an economy that is growing,” a senior executive at a major European hotel group told the Post.
“That is the reason why we are definitely not walking away from China, absolutely not.”
Additional reporting by Luna Sun


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Beijing has pledged to open up even more to foreign investment. But some officials are becoming more selective about the projects they want


Beijing has pledged to open up even more to foreign investment. But some officials are becoming more selective about the projects they want.


What China’s next 5-year plan means for foreign investors: ‘quantity to quality’

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Beijing has pledged to open up even more to foreign investment. But some officials are becoming more selective about the projects they want

Beijing has pledged to open up even more to foreign investment. But some officials are becoming more selective about the projects they want