This information is derived from the State Department's Investment Climate Statement.
The U.S. Department of State Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.
Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
These statements highlight persistent barriers to further U.S. investment. Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy. To access the ICS for China, visit the U.S. Department of State Investment Climate Statements website.
Please refer to the State Department’s 2022 ICS on China for the full report.
In 2021, the People’s Republic of China (PRC) was the number two global Foreign Direct Investment (FDI) destination, behind the United States. The PRC implemented major legislation in 2021, including the Data Security Law in September and the Personal Information Protection Law in November.
The PRC remains a relatively restrictive investment environment for foreign investors due to restrictions in key sectors and regulatory uncertainties. Obstacles include ownership caps and requirements to form joint venture (JV) partnerships with local firms, industrial policies to develop indigenous capacity or technological self-sufficiency, and pressures to transfer technology as a prerequisite to gaining market access. New data and financial rules announced in 2021 also created significant uncertainty surrounding the financial regulatory environment. The PRC’s pandemic-related visa and travel restrictions significantly affected foreign businesses operations, increasing labor and input costs. An assertive Chinese Communist Party (CCP) and emphasis on national companies and self-reliance has heightened foreign investors’ concerns about the pace of economic reforms.
Key developments in 2021 included:
- The Rules for Security Reviews on Foreign Investments came into effect January 18, expanding PRC vetting of foreign investment that may affect national security.
- The National People’s Congress (NPC) adopted the Anti-Foreign Sanctions Law on June 10.
- The Cyberspace Administration of China (CAC) issued draft revisions to its Cybersecurity Review Measures to broaden PRC approval authority over PRC companies’ overseas listings on July 10.
- China formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on September 16.
- On November 1, the Personal Information Protection Law (PIPL) went into effect and China formally applied to join the Digital Economy Partnership Agreement (DEPA).
- On December 23, President Biden signed the Uyghur Forced Labor Prevention Act. The law prohibits importing goods into the United States that are mined, produced, or manufactured wholly or in part with forced labor in the PRC, especially from Xinjiang.
- On December 27, the National Reform and Development Commission (NDRC) and the Ministry of Commerce (MOFCOM) updated its foreign FDI investment “negative lists.”
While PRC pronouncements of greater market access and fair treatment of foreign investment are welcome, details and effective implementation are needed to ensure equitable treatment.