China’s financial services and fintech foreign direct investment (FDI) heyday may be behind it. Capital expenditure (capex) into both sectors, which reached a high of $4.7tn in 2020, fell 81% to $864bn, as of October 2021, according to FT-owned greenfield data monitor fDi Markets. Similarly, FDI-created jobs fell by 70%, to 1978.
The number of projects created in the country through FDI fell by 14% in the first 10 months of 2021, making it the second year of decline. There were 21 projects for the full year 2020, a 58% decrease in project numbers from 2019.
A source of concern for foreign companies looking to set up operations in China is the changing regulatory environment covering financial services companies and fintechs. For example, the China Banking and Insurance Regulatory Commission and the People’s Bank of China jointly drafted Interim Internet Microlending Governance Rules on November 2, 2020, which puts constraints on microlending. The high-profile cancellation of Ant Group’s initial public offering a month earlier also acted as a sign of the Chinese regulators’ shifting attitude to fintechs.
In the first 10 months of 2021, Shanghai was the top destination, winning the highest number of projects, capex investment and job creation. Over the past five years, the city has attracted 86 projects in financial services and fintech, compared with Beijing’s 42 projects and Shenzhen’s 20 projects.
Recently announced FDI projects in Shanghai include: UAE-based Mashreqbank opening a liaison office that will serve the domestic market; UK-based Wise, a fintech firm providing a money transfer service, announcing plans to open a new office to focus on domestic expansion; and Hong Kong-based Inspiration Capital Partners, a private equity firm focusing on growth and control investments, also opening an office.
China had the most sourced projects from the US in 2021, yet the UK had the highest capex investment and job creation. However, FDI from the US and UK into China has significantly decreased across all three index levels between 2020 and 2021.
