Thought Leadership

Why China continues to attract foreign investment

China’s economic fundamentals remain strong. With a population of approximately 1.4 billion and the world’s second-largest economy by GDP, it offers access to a vast and increasingly sophisticated consumer base. Growth in the middle class continues to drive demand for higher-quality goods and services across healthcare, advanced manufacturing, automotive, biotechnology, renewable energy and consumer sectors. For many international businesses, China is no longer simply a production base, but a core strategic market.

A distinctive and advanced digital ecosystem

China’s highly integrated digital environment is a defining feature of its business landscape. Platforms such as WeChat and Alipay combine communication, payments, marketing and customer engagement into single ecosystems, while e-commerce and livestream selling operate at exceptional scale. Companies that adapt effectively can achieve rapid market penetration and operational efficiency. Those that rely on Western digital assumptions, however, often struggle to gain traction.

Economic outlook and policy direction

China’s GDP growth of around 4.5% last year, with expectations of approximately 5% this year, continues to outperform most major economies. Growth has moderated from post-pandemic peaks, but reflects a more sustainable trajectory aligned with policy priorities around innovation, productivity and domestic consumption.

The government’s commitment to “opening up” remains central. Continued reductions to the foreign investment negative list have expanded access in manufacturing, new energy, healthcare and professional services. Outside restricted sectors, foreign companies receive national treatment and forced technology transfer is prohibited. Nevertheless, industries linked to national security or public interest remain tightly regulated.

Managing regulatory and compliance complexity

Regulatory complexity remains one of the most significant challenges for foreign businesses. Compliance requirements are layered, combining national legislation with sector-specific rules and local implementation. Licensing, periodic filings and regulatory inspections require careful coordination, while regulatory expectations can evolve quickly. For many companies, proactive compliance management is essential to avoid disruption.

Digital, cultural and operational adaptation

Digital adaptation is unavoidable. Western platforms such as Google, Facebook and WhatsApp are inaccessible, requiring companies to redesign workflows, marketing and communications around domestic platforms such as WeChat and Baidu.

Cultural understanding is equally important. Business in China is relationship-driven, with an emphasis on trust, long-term engagement and indirect communication. Concepts such as guanxi continue to shape negotiations and partnerships. Misreading these dynamics can undermine otherwise sound commercial strategies.

Establishing and operating effectively

Foreign investors can choose from several entry structures, including wholly foreign-owned enterprises, joint ventures and representative offices, each with distinct regulatory and tax implications. Although registration processes have improved, language barriers and procedural complexity mean local support remains critical.

China’s tax system includes corporate income tax, VAT and property-related taxes, with incentives available for high-tech, export-oriented and regional development activities. Labour compliance, including social insurance and work permits for foreign employees, requires careful oversight.

Concerns around financial access and profit repatriation are common but generally manageable. Financial data can typically be accessed for management purposes, and profits can be repatriated once tax and compliance obligations are met. In practice, issues usually arise from incomplete planning rather than formal restrictions.

The role of local advisers and PrimeGlobal firms

China’s accountancy profession is large, mature and increasingly consolidated, with the top firms accounting for the majority of industry revenue. Firms provide audit, tax, due diligence, internal controls and cross-border reporting services, supporting both inbound and outbound investment.

China’s accountancy profession is large and increasingly sophisticated:

• Around 10,800 CPA firms

• Over 105,000 practising CPAs

• Market size of approximately USD 16 billion

• The top 20 firms generate over 70% of total industry revenue

For PrimeGlobal member firms, collaboration with trusted Chinese counterparts enables clients to navigate regulatory change, manage risk and align local operations with global reporting and governance standards. Local advisers act not only as compliance specialists, but as strategic partners in a complex and fast-moving market.

Success in China requires more than capital. It demands adaptation to regulation, culture and a uniquely integrated digital environment. For international clients supported by well-connected PrimeGlobal firms and strong local partners, China continues to offer significant long-term opportunity in one of the world’s most dynamic economies.