Despite a global slowdown in cross-border investment, foreign companies are increasingly reinvesting profits in China, signaling growing confidence in the world's second-largest economy.

In the first half of 2025, over 30,000 new foreign-invested enterprises were established in China, an 11.7% increase year on year, according to the Ministry of Commerce. However, the actual value of foreign direct investment (FDI) declined by 15.2%, reflecting global headwinds. Still, during China's 14th Five-Year Plan (2021–2025), the country welcomed 229,000 new foreign enterprises, surpassing the previous five-year period by 25,000.

A key driver behind this growth is the rising trend of “profit reinvestment”: foreign investors using earnings generated within China to fund new ventures, expand existing operations, or acquire stakes in local companies. China's recent policy measures, including the Notice on Measures to Encourage Reinvestment by Foreign-Invested Enterprises, have simplified approvals, improved land and financial services, and introduced tax incentives to stimulate this cycle.

“These measures lower costs and boost efficiency, enabling foreign firms to expand confidently despite global uncertainties,” said Yuan Shenglong, senior official at the Chinese Academy of Macroeconomic Research.

Real cases illustrate this momentum:

• Lexus launched an electric vehicle project in Shanghai within five months.

• Belgian industrial firm Vandewiele opened its largest-ever China facility in Jiangsu.

• German cleaning equipment leader Kärcher is expanding manufacturing and opening a flagship store in Shanghai’s transport hub.

High-tech sectors stand out with remarkable growth. FDI into e-commerce services soared by 127.1%, pharmaceuticals by 53%, and aerospace manufacturing by 36.2% in the first half of 2025. For instance, L’Oréal recently invested in Chinese biotech startup Veminsyn to develop sustainable cosmetic ingredients, highlighting China’s role as an innovation hub.

Financial incentives are also driving reinvestment. Otis Elevator’s China CEO highlighted a 10% tax credit on reinvested profits, encouraging further investment in urban infrastructure modernization.

Professional service providers are seeing increased demand, supporting foreign investors on tax, compliance, and regulatory issues — crucial in navigating China's complex landscape.

From a global perspective, reinvestment deepens companies' local footprint and resilience. With rising FDI from Switzerland, Japan, and the UK, China remains a strategic priority, offering operational agility, access to innovation, and risk diversification.

In sum, reinvestment is transforming foreign firms’ presence in China from transactional to strategic — anchoring them firmly in a market that continues to evolve and offer opportunities despite global uncertainties.