Good news! Foreign capital is back?
On the first day after the holiday, the market showed a divergent trend.
The insurance sector, jokingly referred to as the "old guys," staged a strong rebound.
Similarly, the CSI 300 index, where these "old guys" are concentrated, performed impressively, surging by more than 2% throughout the day.
In the afternoon, a "small essay" circulated in the market, saying that a press conference would be held by the State Council Information Office at 3 p.m., where relevant officials would introduce policies and measures to stabilize and improve the utilization of foreign investment. This was attributed to the early reaction of the large financial sector.
Is this really the case?
"Small Essay"
Indeed, the press conference was held at 3 p.m. The specific information released is as follows:
Three key points were put forward regarding "stabilizing foreign investment": stabilizing the existing stock, expanding the increment, and improving the quality;
To stabilize foreign investment, we first need to see if the existing stock is stable. In terms of scale, the number of foreign - invested enterprises in China is constantly increasing. As of the end of 2025, the number of foreign - invested enterprises reached 533,000, with an average annual growth rate of 4.5% compared to the end of 2020. The scale of existing foreign investment is close to $4 trillion, with an average annual growth rate of 3.6% in the past five years;
According to incomplete statistics, more than 8,000 foreign - invested enterprises increased their investment in China in 2025, a year - on - year increase of more than 10%. In the first five months of this year, nearly 4,000 foreign - invested enterprises added additional investment.
Currently, China still ranks first among developing countries in terms of attracting foreign investment, and China has always been a major global destination for cross - border investment.
In the past three years, the actual utilization of foreign investment in China has fluctuated, but overall, the annual increment has remained above $100 billion. From the situation in the first five months of this year, the structure of foreign investment in China has been further optimized, and the increment of foreign investment has generally remained stable, fully demonstrating that China still has strong resilience in attracting foreign investment.
"Over the years, we have seen that foreign investment has both inflows and outflows. But overall, the inflows exceed the outflows."
Although the information from the press conference seems limited and falls short of the rumored major positive news, the early reaction of the market is not entirely without reason.
From a macro perspective, if we want to understand the future trends of foreign investment, it is necessary to mention Trump's visit to China in mid - May.
On the main board of cross - border investment, the US has actually drawn two clear red lines:
The first is the physical insulation in sensitive technology fields. The US has not reduced its restrictions in core technology fields such as semiconductors, high - end artificial intelligence, and quantum computing. This is a rigid compliance red line.
This means that those pure concept technology stocks that are hyped up in the market every day and are claimed to be about to be heavily bought by foreign investment lack the channels for compliant capital inflows from the source.
The second is the pragmatic alignment in traditional economic and financial fields. While imposing technological blockades, the US has clearly stated that it hopes China will further relax the restrictions on the shareholding ratio of foreign capital in financial and insurance industries, so that top asset management giants on Wall Street and century - old insurance behemoths can obtain more substantial access thresholds.
This brings about a huge cognitive turning point:
Foreign investment is not not investing; instead, their investment tracks are undergoing a drastic structural reconstruction. They are giving up those high - energy - consuming and uncertain stories and turning to more transparent and controllable fields.
As for why they are so fond of the financial and insurance fields, it is probably because these two industries have certainty (business models), stability, and controllability (mostly state - owned enterprises).
You know, the assets of these big shots are tens of billions or even hundreds of billions of US dollars. Their pain point is how to avoid large systematic drawdowns, rather than pursuing a ten - fold return in a year like retail investors.
What Do Foreign Investors Like to Buy?
In the domestic investment circle, "foreign investment" has always been a grand label that attracts a lot of attention.
Whenever the market fluctuates or US technology giants hit new historical highs again, all kinds of information will automatically become active and almost flood the WeChat Moments every now and then. For example, it is claimed that foreign investment is making large - scale purchases, a certain concept sector will have a cross - era opportunity, or the list of potential stocks that foreign investment will definitely buy next has been leaked.
These narratives are often very inciting, but in the capital market, blind following often means the risk of buying at a high price.
Actually, the underlying logic and flow direction of foreign investment have already been clearly written.
Since entering the A - share market for more than a decade (especially since the launch of the Shanghai - Hong Kong and Shenzhen - Hong Kong Stock Connect programs), their investment style has been very dull and single.
If we use one word to describe the investment style of foreign investors, it is "extreme certainty." They rarely make blind and frequent moves and only pursue replicable time - compounded returns within their capabilities.
Looking at the historical statements of northbound funds and QFII, the real data shows obvious "large market capitalization, high concentration, and high ROE" characteristics.
First, the positions are highly concentrated. In the total positions of foreign investors in the A - share market, the positions of the top 100 stocks by market capitalization have long been stable between 60% and 70%;
Second, they attach great importance to moats. The average return on equity (ROE) of their heavily held stocks has long been maintained at around 15% to 20%, far exceeding the market average.
There are only a few core sectors that foreign investors are really willing to lock in for the long term and invest real money in.
First is the core consumer sector such as food and beverages. The proportion of northbound funds' positions in this sector has long been maintained between 12% and 15%. For Kweichow Moutai alone, the historical peak of foreign investors' market value of holdings has exceeded 150 billion yuan, because the consumption base of 1.4 billion people is real.
Second is the cash - flow generating sector such as household appliances. In the core holdings of industry leaders such as Midea Group and Gree Electric Appliances, the proportion of foreign investors' holdings has repeatedly reached the 28% upper limit of foreign shareholding, and the system has automatically suspended purchases.
Finally is the new energy and pharmaceutical and biological sectors. For leading companies such as CATL and Hengrui Medicine, which have global industrial chain barriers or rigid medical needs, the proportion of foreign investors' holdings has long been maintained at more than 8% to 10%.
The logic of foreign investors is extremely simple: They don't listen to any stories they don't understand and only recognize continuous and real cash flows.
Compared with the above cold data, there are often huge cognitive misunderstandings in the sectors that are used as a banner every day in the market to call on retail investors to chase high prices.
For example, in the concept - type technology sector, whenever the stock prices of overseas technology giants soar, the domestic speculation atmosphere will naturally interpret it as foreign investment will definitely copy the bottom by benchmarking.
But the real data shows that the proportion of foreign investors' holdings in those technology concept stocks in the A - share market with high price - to - earnings ratios or even still in the red has long been less than 0.5%, and in most cases, their positions in the background are zero.
This is not only because the financial indicators do not meet the stock - selection criteria of foreign investors but also because of the rigid isolation of the aforementioned new US compliance policies.
However, this does not mean that the sectors that foreign investors were fond of in the past will still be favored.
As mentioned above, foreign investors may actually have turned to more certain and controllable fields such as finance and insurance, rather than traditional consumer stocks like food and beverages and household appliances.
On the one hand, the current situation of these fields cannot be compared with the eras of large - scale infrastructure, large - scale real estate, and consumer Internet.
On the other hand, this shift is not because finance and insurance are particularly good but rather a bit of a helpless situation. Under the new geopolitical and great - power competition, as well as the new economic and industrial cycles, while still adhering to their investment principles, there are actually not many options.
Another Incremental Information
At the press conference, the head of the Foreign Investment Administration Department of the Ministry of Commerce said that to support foreign investment to further participate in the high - quality development of China's pharmaceutical industry, the "Action Plan for Stabilizing and Improving the Utilization of Foreign Investment" has put forward a number of additional measures on the basis of existing policies to address the concerns of foreign - invested pharmaceutical enterprises.
First, on the basis of the pilot project of segmented production of biological products, relevant detailed rules will be studied and introduced to carry out cross - border segmented production of chemical drugs;
Second, on the basis of the existing pilot areas for the opening of biotechnology and wholly foreign - owned hospitals, efforts will be made to further expand the scope of the pilot project;
Third, insurance companies will be supported to include more innovative medical devices in the scope of commercial insurance, and high - quality innovative medical devices will continue to be encouraged to enter the Chinese market;
Fourth, measures will be taken to facilitate the entry of drugs produced by foreign - invested enterprises into the drug retail channels.
Returning to the fields that foreign investors are fond of, the pharmaceutical and biological sector can actually be counted as one of them.
If we have to choose an effective field from the original ones, it may only be the pharmaceutical and biological sector.
Although it is also a technology - intensive and capital - intensive industry, compared with industries such as AI, semiconductors, military, and energy that are likely to trigger national security concerns, the pharmaceutical and biological industry is relatively less sensitive.
This may leave room for technological and capital cooperation between China and the United States.
Actually, the two countries are not as completely estranged as some people say, nor will they simply return to the past. A more realistic possibility is that in sensitive national security fields, each country will do its own thing to achieve major risk isolation, while in non - sensitive fields, it will not affect everyone's ability to make money.
In addition, the pharmaceutical and biological field can actually bring benefits to the health of the people of both countries. Whether it is a foreign government that attaches importance to votes or a domestic government that takes the people's pursuit of a better life as its goal, this is a field that both can accept.
Conclusion
The issue of foreign investment has always been a matter that affects the nerves of domestic investors, and the discussions and even debates around it have never stopped.
Many people are looking forward to the return of foreign investment, but in fact, foreign investment has never left.
They are not not increasing their investment. It's just that instead of frantically buying consumer blue - chip stocks as in the past, they are now calm capital that re - defines compliance boundaries and re - prices certainty under the new pattern of great - power games.
As investors, understanding this trend is ten thousand times more important than chasing every "small essay."
Glonhui Statement: The views in this article are all from the original author and do not represent the views and positions of Glonhui. It is particularly reminded that investment decisions should be based on independent thinking. The content of this article is for reference only and is not intended as any actual operation advice. The trading risk is borne by the investor.
This article is from the WeChat official account “Glonhui APP” (ID: hkguruclub), written by Shen Peng and published by 36Kr with authorization.