Financials / Investments
Foreign investment in China has sharply declined in recent years. After peaking at $344 billion in 2021, inbound foreign direct investment (FDI) fell to $114.8 billion in 2024, marking a 27% drop year-on-year and the lowest level in decades. In 2025, FDI into China continued its downward trajectory, falling by another 15% to approximately $97.6 billion, the lowest annual figure since the early 1990s. This downturn reflects growing investor concerns over China's restrictive business environment, regulatory unpredictability, and heightened state control over private enterprises. Beijing has attempted to reverse the trend by pledging further market opening and easing some rules, but foreign firms remain cautious due to capital controls, data security laws, and political risks. A survey by the European Chamber of Commerce in China released in early 2026 found that only 17% of member companies plan to expand their China operations in the coming year, the lowest level in two decades. While China's economy grew 5.3% in the first quarter of 2024, structural challenges such as property sector stress and weak consumer demand persist, adding to investor uncertainty. In 2025, GDP growth slowed to 4.7%, missing official targets and further dampening foreign investment appetite.
China's Belt and Road Initiative (BRI), launched in 2013, continues to evolve. Initially criticized for creating "debt traps," the BRI is now shifting toward smaller, greener, and less risky projects, emphasizing high-quality investment, project finance, and green energy initiatives. However, debt sustainability concerns remain acute: in 2025, 75 developing countries faced $22 billion in BRI-related repayments, raising fears of economic strain and sovereignty risks. In 2026, that figure has risen to an estimated $26 billion, with Zambia and Pakistan seeking restructuring talks under the G20 Common Framework. Italy, the only G7 country to join the BRI in 2019, formally withdrew in December 2023, citing limited economic benefits and strategic realignment with the EU and the United States. Meanwhile, the U.S. and G7 partners are advancing the Partnership for Global Infrastructure and Investment (PGII) as a counterweight to BRI. PGII aims to mobilize $600 billion by 2027, with the U.S. committing over $60 billion to date and focusing on strategic corridors linking India, the Middle East, and Europe. As of mid-2026, PGII has announced $85 billion in new infrastructure commitments, including a major railway project connecting the UAE to Saudi Arabia.
Europe:
Europe's economy has stabilized after the energy shock triggered by Russia's invasion of Ukraine. Inflation fell to 2.5% in 2024, down from double-digit highs in 2022, while GDP growth remained subdued at 0.8% for 2024, with projections of 1.3% in 2025. In 2025, the eurozone economy grew by 1.1%, slightly below initial projections, as manufacturing weakness in Germany continued to drag on regional performance. The European Central Bank (ECB) began cutting interest rates in mid-2024 after a period of aggressive hikes, lowering the deposit rate from 4.00% to 3.00% by December 2024, and signaling further easing in 2025 as inflation trends toward its 2% target. By June 2026, the ECB has cut its deposit rate further to 2.25%, with markets pricing in two additional cuts by year-end as headline inflation fell to 1.9% in the first quarter of 2026. However, tight lending conditions and weak private consumption continue to weigh on growth, raising concerns about prolonged stagnation despite falling energy prices and improved supply chains. Investment activity in Europe showed modest signs of recovery in early 2026, with private equity deal volume rising 8% year-on-year, driven largely by renewable energy and digital infrastructure assets.
Asia:
Geopolitical tensions and regulatory uncertainty in China have accelerated a pivot toward Asia ex-China markets. Emerging Asia excluding China delivered 8.6% returns in 2023, compared to just 1.3% for China, according to MSCI indices. Foreign investors poured $38 billion into Asia ex-China stocks and bonds in 2023, with $22.4 billion in May alone, marking the largest monthly inflow since 2011. In 2024 and 2025, this trend accelerated, with cumulative net inflows into Asia ex-China markets reaching $112 billion, as global funds reduced their China exposure to multi-decade lows. India has emerged as the region's growth engine, driven by its booming technology sector. In 2024, India attracted $13.7 billion in venture capital funding, a 43% increase year-on-year, making it Asia-Pacific's second-largest VC destination after China. Tech-first sectors—consumer tech, Software as a Service (SaaS), and fintech—accounted for over 60% of total funding, with major deals in quick commerce, AI, and electric mobility. In 2025, VC funding in India grew further to $16.2 billion, surpassing China for the first time as the region's top destination for venture capital, as Chinese dealmaking slumped to just $11.4 billion amid regulatory headwinds and a prolonged tech sector downturn. Global energy giants like Shell Ventures and BP Ventures are investing heavily in India's clean-tech startups, reflecting confidence in its transition toward sustainable growth. In the first half of 2026, India has attracted $9.5 billion in VC funding, maintaining its lead over China, while Southeast Asian markets—particularly Singapore, Vietnam, and Indonesia—have also seen rising foreign investment in manufacturing relocation and data center infrastructure as part of the ongoing "China plus one" supply chain diversification strategy.