Foreign direct investment (FDI) has been a key pillar of China’s growth strategy since it opened up, helping fuel its transformation into the world’s manufacturing hub. Over the past two decades, however, the country’s outbound direct investment (ODI) has expanded even more rapidly, turning it into one of the world’s largest exporters of capital. Today, China’s outward investment exceeds inflows, and it consistently ranks among the top three global investors.
“Over the past decade, China’s cumulative outward direct investment has exceeded $1.8 trillion,” Yang Fanxin, a researcher at the National Academy of Development and Strategy, Renmin University of China, says. “Last year, ODI is estimated to have crossed $200 billion, with manufacturing investment growing by about 15 per cent.”
China’s overseas investments have climbed steadily in recent years, rising to $192.2bn in 2024 and $177.29bn the previous year, placing it among the world’s top three investors alongside the US and Japan for the 12th consecutive year. As the 2024–25 China ODI Tracker compiled by China Briefing shows, outbound investment is now a defining feature of China’s evolving role in the global economy.
Beijing has signalled it will maintain this outward focus. At its fourth plenum in October, which set the tone for economic policy over the next five years, the Central Committee of the ruling Communist Party pledged to safeguard the multilateral trade system and expand two-way investment cooperation.
Pakistan struggles to capture even a fraction of the vast pool of Chinese manufacturing and agri investment
In the early years of the Belt and Road Initiative (BRI), investment focused on stand-alone infrastructure projects led by state-owned enterprises. But it has since shifted towards localisation in higher-value sectors.
Much of ODI is now flowing into manufacturing, with new plants directly creating large numbers of local manufacturing jobs across different regions, while reshaping host economies by expanding their industrial capacity and supporting supply-chain development. Chinese firms are also placing greater emphasis on technology transfers, management expertise and technical standards. This approach helps host countries build industrial capacity while allowing Chinese firms to embed themselves in local markets, says a December report by the People’s Bank of China.
The reasons are obvious: expansion into international markets has become essential for companies pursuing new growth opportunities and greater integration into the global economy amid intensifying competition in the domestic market. Trade tensions with major economies like the EU and the US have further accelerated the trend of outbound investment as companies seek to manage risk, localise production and navigate tariff and regulatory barriers within legal frameworks.
As such, this trend is likely to continue over the next few years as companies seek to diversify income sources amid weak domestic demand and intense price wars at home, according to a June report by Moody’s Ratings. Stronger policy support, including financial aid, tax subsidies and advisory services, is also expected to boost outflows, the report said, adding that investments are likely to target emerging markets amid trade uncertainties. Chinese investment in Southeast Asia, for instance, surged by 36.8pc in 2024, mainly in manufacturing. This has helped firms tap the region’s growing domestic markets and hedge against external headwinds from the US-China trade war.
Ms Yang stresses that China’s development has never been a zero-sum game. “Through investment, imports and industrial cooperation, particularly under frameworks such as BRI, China is helping build manufacturing capacity abroad while sustaining its own growth.”
For example, she points out, Chinese-invested nickel-iron processing parks in Indonesia have created over 50,000 jobs, helping the country transition from resource exports to high-end manufacturing.
Pakistan too has been a beneficiary of Chinese investment of nearly $30bn in energy and transport infrastructure under the China-Pakistan Economic Corridor, a flagship BRI in the last decade. Yet despite its close strategic ties with Beijing and its central place in the BRI, Pakistan has lately struggled to capture even a fraction of the very vast pool of Chinese manufacturing and agricultural investment, highlighting deep structural weaknesses at home rather than any shortage of Chinese capital.
Some analysts argue that it is mainly because of structural, policy and execution failures on Pakistan’s side that it has failed to attract Chinese companies. Compared with Asean countries, Pakistan has offered strategic promises but a weak investible environment.
“Pakistan did not lose Chinese manufacturing and agricultural investment because China withheld it. It lost it because it failed to make itself investable,” maintains a person who has been consulting Chinese companies on their investments in Pakistan for the last decade. “Without stable policies, competitive energy pricing, export-led incentives and functioning industrial infrastructure and special economic zones, Pakistan remains a high-risk destination for the kind of long-term Chinese capital that is reshaping supply chains elsewhere.”
Analysts blame policy unpredictability, stop-go reforms, macroeconomic volatility, recurring balance of payments crises, poor industrial infrastructure, rising costs of doing business, weak export orientation, the government pressure on power producers to change their original agreements to slash their capacity charges and profits, and delays in their payments due to poor Chinese investment appetite in Pakistan. On top of that, Beijing is deeply concerned about the safety of its nationals working in Pakistan due to recent targeted attacks and killings of Chinese workers. Beijing is not short of options; Pakistan is.
Published in Dawn, The Business and Finance Weekly, January 25th, 2026