China's tech sector sees mixed fortunes as foreign investment rises and chip stocks plunge

Foreign direct investment (FDI) into China fell 5% in the first half of 2024 to about $59.4 billion, a narrower decline than in previous periods. Investment in high‑tech industries surged 33% year‑on‑year, lifting technology’s share of total FDI to a record 42.4%. The number of new foreign‑invested firms rose 5.3%, and existing firms expanded investments, indicating continued confidence in China’s market despite weak global capital flows.

At the same time, shares of Chinese semiconductor companies tumbled, with Hua Hong Grace, Beijing YanDong Micro, Ningbo Silicon Electronics and Shenzhen Intellifusion falling between 9% and 13% after state‑fund support failed to halt a broader sell‑off. Analysts cited long‑standing overvaluation and heightened competition from AI models such as China’s Kimi K3, prompting U.S. Treasury scrutiny. The decline dragged the Shanghai Composite Index down about 3% on the day of the World AI Conference in Shanghai, where President Xi emphasized open‑source AI development for the Global South.