1 Beijing introduces action plan to ‘stabilize foreign investment’ amid trend of capital outflows
Beijing rolls out plan to retain foreign investment
Feb. 19
The PRC Ministry of Commerce and the National Reform and Development Commission published the “2025 Action Plan for Stabilizing Foreign Investment” (2025年穩外資行動方案). The Plan proposed 20 measures across four key areas:
- Orderly expansion of independent opening-up.
- Enhancing investment promotion.
- Improving the efficiency of open platforms.
- Strengthening service and support measures.
The 20 measures are:
- Expand pilot programs for opening up telecommunications, healthcare, education, culture, and other sectors.
- Implement the full removal of foreign investment access restrictions in the manufacturing sector.
- Support the Beijing Demonstration Zone, expand pilot areas, and replicate successful pilot experiences.
- Promptly the orderly opening-up of the biopharmaceutical sector.
- Encourage foreign equity investment in China.
- Establish the “Invest in China” brand.
- Support foreign-invested enterprises in reinvesting their profits within China.
- Expand the catalog of encouraged foreign investment industries.
- Allow foreign-invested holding companies to use domestic loans for equity investments.
- Encourage multinational corporations to establish investment holding companies.
- Optimize foreign merger and acquisition regulations, and lower cross-border share-swap thresholds.
- Strengthen attraction of foreign investment in key sectors, with a focus on high-tech industries.
- Improve international promotion of economic policies and the business environment.
- Deepen reforms in development zone management systems.
- Implement a free trade zone upgrading strategy.
- Incorporate more foreign investment projects into the major foreign investment project list and accelerate implementation.
- Establish a government procurement system for domestic product standards.
- Encourage financial institutions to provide financing services for foreign-invested enterprises.
- Facilitate the movement of people.
- Enhance trade facilitation measures for foreign-invested enterprises.
In concluding, the Plan required all regions and relevant departments to ensure the full implementation of the measures within 2025 and effectively boost foreign investor confidence.
Feb. 20
The State Council Information Office introduced measures for expanding high-level opening-up and stabilizing foreign investment in 2025 during a regular press briefing.
During the Q&A session, vice commerce minister and deputy international trade representative Ling Ji highlighted four key features of the “2025 Action Plan for Stabilizing Foreign Investment:
- The Plan sends a strong signal that the PRC is opening up further.
- The Plan enhances policy support, including measures to expedite the approval of innovative drugs and support foreign enterprises in pilot programs for segmented biopharmaceutical production.
- The Plan actively promotes foreign investment.
- The Plan addresses the concerns of foreign enterprises, including clarifying government procurement standards for domestic products, optimizing volume-based procurement policies for pharmaceuticals, and expanding the list of countries eligible for unilateral visa-free entry.
Ling Ji added that the PRC commerce ministry will launch a “service and support for foreign enterprises” nationwide initiative. The initiative will include on-site visits by officials to foreign-invested enterprises to directly understand their concerns and resolve issues. If issues cannot be immediately addressed, then local officials are required to follow the steps in escalating the issue upwards to ensure that reasonable concerns are properly resolved.
Ling also noted the significant contributions of foreign enterprises in China, including nearly 7 percent of total employment, one-seventh of the total tax revenue, around one-third of total imports and exports, and half of all exports in the mechanical, electrical, and high-tech sectors.
Foreign exchange and foreign investment data
Feb. 14
The State Administration of Foreign Exchange (SAFE) released data showing that China’s capital and financial account (including net errors and omissions for Q4 2024) recorded a deficit of $441.6 billion in 2024. The deficit was more than double the $215.1 billion in 2023.
Additionally, China’s net foreign direct investment outflow in 2024 reached $168.4 billion, the highest level since records began in 1990. In comparison, the net foreign direct investment outflow in 2023 was $152.5 billion and the net pre-pandemic inflow in 2019 was $59.1 billion.
Feb. 18
SAFE released data showing that Chinese banks recorded in January 2025:
- $181.5 billion in foreign exchange settlement.
- $226.8 billion in foreign exchange sales.
- $45.3 billion in settlement and sales deficit, a 362.2 percent increase from the $9.8 billion deficit in January 2024.
Feb. 19
The Ministry Commerce reported that in January 2025:
- 4,229 new foreign-invested enterprises were established nationwide, a decline of 7.8 percent from the previous year.
- 97.59 billion yuan in actual foreign direct investment utilized, a drop of 13.4 percent from a year ago and a 27.5 percent increase from the previous month.
For the full year 2024:
- 59,080 new foreign-invested enterprises were established, an increase of 9.9 percent year-on-year.
- 826.25 billion yuan in actual foreign direct investment utilized, a decline of 27.1 percent year-on-year.
U.S. tariffs
President Donald Trump has imposed or planned to impose a range of tariffs since taking office, including:
- Additional tariffs of 10 percent on all imports from China, effective Feb. 4, 2025.
- Tariffs on 25 percent on all imports of steel and aluminum.
- Proposed tariffs of 25 percent on imports of automobiles, pharmaceuticals, semiconductors, and lumber and forest products, likely effective around April 2, 2025.
- Considering imposing reciprocal duties on countries that impose import taxes on U.S. goods.
Our take
Beijing’s 20 measures to “stabilize foreign investments” follow earlier propaganda downplaying the exodus of foreign investments from China, the release of record foreign direct investment outflows in 2024, and other unflattering data.
At a glance, Beijing’s foreign investment stabilization plan seems to expand the scope of what foreigners can invest in and seems somewhat appealing. A closer look at the plan and the CCP’s track record on foreign investments, however, indicate that the measures lack originality and are unlikely to ease the concerns of foreign investors.
1. The foreign investment stabilization plan calls for expanding foreign investment pilot programs in telecommunications, healthcare, education, culture, and other sectors. However, it is unclear if the CCP will follow through on its pledge to truly open up those sectors or if there are genuine prospects for foreigners.
Telecommunications
The CCP agreed to open up China’s telecommunication sector to foreign investment in 1999 to reach a final agreement on joining the World Trade Organization. However, Beijing has several restrictions in place that essentially blocked foreign suppliers from providing basic telecommunications services and limiting them to value-added services.
Given the CCP’s need for strict regulation of speech and the internet, investors are unlikely to see true liberalization of foreign investment in the telecommunication sector. Beijing could relax some restrictions for the pilot programs, but make other demands of foreign investors that would prove unappealing.
Biopharmaceutical
The CCP could be opening up China’s biopharmaceutical sector to facilitate its acquisition of Western technology and innovation. Once the know-how has been “transferred,” the CCP authorities could gradually push out foreign investors from the market through various administrative means.
Healthcare
The CCP released plans in late 2024 to allow foreigners to establish wholly foreign-owned hospitals in nine cities (Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and the whole of Hainan). However, the outlook for hospitals in China is bleak, with both public and private hospitals facing financial difficulties amid deteriorating economic conditions on the mainland.
According to a national bankruptcy database, over 200 hospitals have declared bankruptcy in the past five years. This is compared to just seven hospitals going bankrupt in the same period.
Education and culture
The CCP has long been wary of Western values and culture, and often promotes anti-Western propaganda. As such, Beijing’s pledge to open up the cultural sector to foreigners is likely to end up being another empty promise.
Foreigner investors are also likely to be wary of investing in China’s education sector. In 2021, the CCP cracked down on private tutoring and the gaming industry under the guise of reducing the academic burden on children, causing investors to suffer heavy losses — a memory that remains fresh for many.
2. Beijing likely prefers that the foreign investment it attracts to China can flow towards high-tech manufacturing and other sectors that are crucial for growing the PRC’s self-sufficiency and national strength. This could become more obvious as its foreign investment stabilization plan gets implemented.
Meanwhile, Beijing is likely hoping to use equity investment and financial services liberalization to have foreign capital help bail out China’s struggling economy. For instance, the CCP’s encouragement of financial institutions to provide financing services for foreign-invested enterprises seems like an attempt to address the credit squeeze caused by the collapse of the real estate bubble. Foreign investors, however, might be hesitant to enter China at this time given the lack of high-quality investable assets (the low yield of China’s 10-year government bonds [around 1.7 percent at the time of writing] indicate an asset shortage) and the risk of becoming the “last buyers” of distressed assets.
3. The Xi leadership runs the risk of empowering its internal rivals in “stabilizing foreign investment.” Party and business elites could exploit the liberalization of foreign investment channels for equity investment and financing to seize domestic assets and open new pathways to transfer their capital out from China.
4. The CCP authorities are likely to experience difficulties in implementing their foreign investment stabilization plan. Beijing has rolled out measures to promote foreign investment several times over the past decade, but with limited effectiveness.
Concurrently, foreigners are increasingly being spooked by the CCP’s prioritization of national security over the economy, as well as other seemingly unpredictable regulatory changes. We earlier mentioned the 2021 crackdown on the private tutoring and gaming industries. Beijing also abruptly suspended Ant Group’s massive IPO in 2020 and forced Didi to delist from the New York Stock Exchange in 2022.
China is also becoming less appealing to foreigners as an investment destination due to several internal and external factors, such as persistent deflationary pressures, demographic crises, new outbreaks of pathogens on the mainland, and growing concerns about the impact of a renewed Sino-U.S. trade under President Donald Trump. Ultimately, the CCP’s desire to have foreign capital help bail China out of its economic troubles may yield very limited results.
2 Why Chinese food delivery platforms are offering social security benefits to riders
Chinese platforms offer social insurance
Feb. 19
JD.com announced that starting March 1, 2025, full-time delivery riders will gradually be provided with “five social insurances and one housing fund” (五險一金) and part-time riders will be offered accident insurance and health medical insurance. The company added that it was the first platform enterprise to extend “five social insurances and one housing fund” coverage to food delivery riders after being the first to do so for couriers.
Shortly after, Meituan announced on its official WeChat account that it plans to gradually provide social security coverage for full-time and stable part-time riders starting from the second quarter of 2025.
Backdrop
Meituan founder Wang Xing attended Xi Jinping’s symposium with private entrepreneurs in Beijing on Feb. 17, but JD.com’s founder Richard Lu and Baidu founder Robin Li were absent.
On the day of the symposium, JD.com’s stock price fell 3.62 percent and Baidu’s shares dropped 6.94 percent on the Hong Kong Stock Exchange.
Our take
1. JD.com’s move to provide social security and insurance benefits for full-time and part-time food delivery riders appears to be aimed at allowing it to be more competitive in the food delivery industry. The company launched “JD Food Delivery” on Feb. 20 and saw order volumes in some cities increase by more than 100 times after about a week. JD Food Delivery has since expanded to 39 cities across China, including 24 provincial capitals and directly administered municipalities. Also, nearly 200,000 restaurant businesses have applied to join the platform.
JD.com’s decision to offer social security and insurance benefits for its riders drew significant public attention and praise, and has pressured its competitors to follow suit. Meituan in particular previously did not provide social security benefits for its riders, who were engaged through third-party labor dispatch companies and were hence classified as flexible workers who could only receive urban employee pension and medical insurance on an individual basis.
2. Industry competition aside, JD.com’s decision to provide social security and insurance benefits for its delivery riders could be an attempt by founder Richard Liu to improve his political standing by aligning the company with Xi Jinping’s policies. JD.com’s move fits with Xi’s “common prosperity” agenda and enhances the company’s image as a socially responsible enterprise. Meanwhile, Liu could also be concerned that his being left out of Xi’s private enterprise symposium on Feb. 17 meant that he faces greater political risks than the private entrepreneurs who attended the event.
Business elites in China often make moves to have their company conform to the political agendas of the incumbent CCP leadership to ensure their survival in the regime. Examples during Xi’s time in office include:
- In March 2016, Baidu founder Robin Li said, “The sharing economy is building communism.”
- In March 2017, Richard Liu said in an interview, “Artificial intelligence will help us achieve communism in our generation.”
- When the “private enterprises exiting (the market) theory” (私企退場論) was circulating in January 2018, Richard Liu and Tencent founder Pony Ma wore Red Army uniforms at the CCP’s revolutionary base of Yan’an in June that year in a public embrace of so-called “revolutionary culture.”
3. Aside from the reasons listed in the above points, it is also possible that JD.com’s providing of social security and insurance benefits for its riders stemmed from relevant departments in the CCP authorities pushing food delivery platforms to enroll their vast workforce in the social security program to help replenish the PRC’s strained social security fund. According to estimates by the PRC Ministry of Human Resources and Social Security, the net inflow of basic pension insurance for urban employees and residents in 2024 is expected to grow just 2.64 percent to 817.19 billion yuan. This is far below the double-digit growth from 2022 (11.85 percent) and 2023 (41.73 percent). Meanwhile, the China Academy of Social Sciences warned years ago that the regime’s pension fund could be exhausted as soon as 2035 even with Beijing’s backing, and only up till 2042 after the implementation of the publicly unpopular policy to delay the retirement age in China.
Worsening economic conditions in China is placing greater pressure on the pension system. Bloomberg reported that tens of millions of mostly young Chinese workers are suspending pension contributions. Mainland media reports note that many young Chinese lack confidence in the government social security system, including perceived unfairness over the providing of better retirement benefits to government employees and the military. Some young Chinese, having opted out of marriage and child-rearing, prefer to spend the money that would have gone to social security contributions to “live in the moment” and prioritize their current well-being. Some even believe that investing their social security contributions in fixed-income products or the stock market would yield more reliable returns than drawing from the state pension.
If relevant departments in the CCP authorities are indeed behind the move by food delivery platforms to provide social security and insurance benefits for their riders, then they could conceivably add tens of billions of yuan annually to the state social security fund:
- According to mainland media, there were 10 million instant delivery workers in China in 2023, with an estimated annual workforce growth rate of 23 percent. Assuming that the growth rate is accurate and remains constant, there could be over 15 million instant delivery workers in 2025.
- In January 2024, the state-backed China New Employment Forms Research Center noted in its “2023 China Blue-collar Employment Research Report” that around 11 percent of Meituan’s high-frequency riders work more than 260 days a year. Applying this same proportion to China’s entire instant delivery workforce, there are an estimated 1.65 million riders who work similar hours at other delivery platforms and should be eligible for “full-time” benefits.
- Delivery riders make between 5,500 yuan to 11,000 yuan per month depending on the city. Assuming an average monthly income of 8,000 yuan, the combined employer and employee social security contribution per person is about 3,780 yuan per month. In calculating just the 1.65 million riders who should be eligible for “full-time” benefits, this translates into an annual increase of nearly 75 billion yuan for the state social security fund if all food delivery platforms provide social security and insurance benefits for their riders.
It is questionable, however, whether the food delivery platform companies can generate enough profits to fully cover social security contributions. For instance, Meituan had about 819,500 high-frequency delivery riders per the “2023 China Blue-collar Employment Research Report.” If Meituan were to make social security contributions to all those riders, it would need to fork out about 13.26 billion yuan on the low side (assuming that the relatively low social security and housing fund base in Shenzhen is used), or an amount that is nearly equivalent to the company’s operating profit of 13.4 billion yuan in 2023.
It is likely that the food delivery platforms will ultimately make social security contributions for just a small portion of its high-frequency delivery riders or use algorithms to lower the number of those riders and keep contributions low. Alternatively, the platforms could increase delivery fees to generate more revenue and cover the cost of social security contributions.
Over time, JD.com and other food delivery platforms could reconsider their decision to make what seems like a high-cost political investment. Meanwhile, food delivery workers would prefer to receive cash instead of social security benefits as many are in for the job to generate cash flow or as temporary work before transitioning to another field.
