China's new policy is much like Ranveer Singh's new policy. Wait. Hear me out.
The early Ranveer said yes to many projects, went all in, everywhere, with maximum energy. Then there was a quieter period. And now he is being selective —Don 3 rejection being one example.
Similarly, after China opened up to the world, it went on a buying spree. It got burned, some deals blew up, and Western countries cancelled some investments too. Today, it has become more cautious. It invests on its own terms, only in places it trusts. That's why data show a slowdown in investments abroad.
Chinese companies invested over $174 billion abroad in 2025, up by 7%. But the non-financial investments, the common measure of productive investments, remained almost flat. So, has overseas expansion stagnated? The answer lies in where China is investing and how it now views overseas expansion.
Investing Destinations Have Changed
National security remains a priority for many countries dealing with China, leading to tight scrutiny and sometimes even cancellations post-approval, as seen in many Western nations.
We discussed Huawei's bitter past a couple of days ago. Canada forced Hikvision to shut its local operations, and the US ordered HieFo Corporation to divest semiconductor assets, both on national security grounds.
However, China's experience with developing countries in Southeast Asia, Latin America, and Africa is different. That explains a 17% increase in non-financial investments in the Belt & Road Initiative (BRI) region.
Protecting IP & Technology
National security concerns now extend beyond borders and defence into technology. As a result, the US and Europe often push Chinese firms to share technology or produce locally.
Chinese policymakers fear that moving advanced manufacturing or know-how abroad could expose valuable technology to foreign access. Therefore, it has tightened the limits on the overseas transfer of technology, data, and expertise. The new rules cover not just goods and technologies, but also technical training, staff deployment, and cross-border guidance.
But this also means confronting a trade-off: expanding overseas and boosting profits versus protecting strategic technologies.
The Capital Flight Concern
There is another concern: capital flight.
China limits individuals to $50,000 a year in foreign exchange, but wealthy families and entrepreneurs have found ways to move money abroad through offshore companies and other means. In 2024, it began taxing overseas investment gains, and in 2026, it extended foreign investment rules to cover individual investors for the first time.
Apart from this, investing abroad creates pressure on the country's forex reserves. This could be a factor in the ' take it slow' approach.
Comfort in Exports
Lastly, one of the most underappreciated factors is that Chinese firms find exports more attractive than investing abroad.
According to Rhodium's China Cross-Border Monitor, Chinese companies have increased greenfield manufacturing investments overseas, but exports remain their primary way of serving foreign markets. Since the pandemic, domestic manufacturing capacity has expanded much faster than overseas production.
The logic is simple. It is much easier to produce in China and then export. It does not include relocation or technology transfer; rather, it keeps the domestic economic machine moving. Investing abroad is expensive and politically risky in today's world.
History of Overseas Investing
According to Geopolitechs' Substack article, China's approach to overseas investment has evolved through several phases.
Before 2004, China had limited foreign exchange reserves, and most overseas investments required government approval. Around 2014, many rules were relaxed, triggering a boom in outbound investment. However, much of this money flowed into highly leveraged acquisitions of trophy assets such as hotels, real estate, and entertainment businesses. That was the second phase.
In the third phase, it tightened capital outflows by late 2016. It introduced, encouraged, restricted, and prohibited categories in outbound investments. That practice is still carried out. This helped steer capital away from speculative sectors and towards strategic industries such as EVs and infrastructure.
A fourth phase begins on July 1, 2026. The new rules give regulators greater powers to scrutinise overseas investments on national security grounds, similar to the Western powers. It also includes tighter regulations on technology transfers, data sharing, and even the overseas deployment of technical staff. They let the government respond more forcefully if foreign countries sanction Chinese firms, seize Chinese assets, or impose discriminatory restrictions.
China is not retreating from overseas investment, but it is becoming far more selective about where and how its companies invest abroad.
Final Take
The slower headline numbers reflect multiple factors: Chinese capital is less welcome in many places, a state that fears technology leaks, and firms choosing exports due to lower friction. The world that revolves around 'national security' is naturally more expensive, less profitable, and far more frictional.
As Chinese investment becomes more selective and Western countries remain wary of it, countries that maintain good relations with both sides may find themselves in a stronger position to attract and invest capital.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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