China's 2025 action plan: an expanded playbook for foreign investors

China's latest policy plan for foreign investment offers a government commitment to open up traditional industries to offshore players, but it also inherently requires foreigners to alter the way they approach business on the Chinese mainland.

The new 2025 Action Plan for Stabilizing Foreign Investment promises new business opportunities in critical sectors like telecommunications, health care and education, recalibrating the nation's investment model.

The promises point to a changing and complex landscape that foreign investors will need to navigate if they want to seize new growth avenues.

The plan signals China's readiness to further modernize its economy and improve the services available to its expanding, middle-class population. The shift offers foreign investors greater access to these high-growth markets – an appealing prospect in a country emerging as a global hub for innovation and technology.

However, while the door may be ajar, foreign companies will need to approach these sectors with fresh perspectives and deep local expertise.

Jumping ahead of competition

For example, as China moves toward 6G and other advanced technologies, foreign players may find new avenues to collaborate on 5G+ applications, such as autonomous driving, "smart cities" and industrial Internet of Things – areas where the country aims to leapfrog global competition.

Yet, despite the dominance of Huawei and ZTE in these advanced fields, foreign firms with cutting-edge technologies will likely find niches in specialized areas like network security and AI-driven applications.

In the pharma sector, China's evolving health-care ecosystem offers significant growth opportunities for foreign companies.

As the country shifts toward precision medicine and biotech innovation, foreign firms like Roche, Novartis and Merck & Co are well-positioned to leverage China's vast patient data and growing demand for high-quality health care.

China's commitment to expanding research and development incentives and to streamlining drug-approval processes for next-generation therapies will mean that companies will have new opportunities for faster market access, particularly in areas like cell and gene therapy, personalized medicine and cancer treatment.

The increasing push for domestic pharmaceutical self-sufficiency will also create opportunities for foreign firms to partner with Chinese innovators, particularly in developing cutting-edge treatments and technologies.

Digital education

In the education sector, China's ambitious plans for online learning and "lifelong" education are creating fertile ground for foreign education-tech companies. While domestic players like VIPKid have already established a foothold, opportunities will expand with the country's ongoing reforms in digital education.

International institutions such as Harvard and MIT, through their online programs, could find further opportunities to work alongside Chinese universities to provide specialized training in emerging fields like AI, data science and environmental sustainability.

Moreover, foreign companies in vocational education and adult learning could tap into a growing demand for advanced skills training as China seeks to create a workforce for the future economy.

Equality in public procurement

One of the most notable aspects of the new action plan is its emphasis on equal access to public procurement for foreign firms manufacturing within China.

This move seeks to grant foreign-invested companies the same rights as local firms in bidding for government contracts. It's a significant step toward fostering a fairer and more competitive business environment.

Still, one key question looms large: How will this policy translate into tangible benefits for foreign investors?

The devil is once again in the regulatory detail. Just what concrete steps will be taken to give foreign-invested companies a fair shot in a system historically tilted toward local players are still unclear.

The success of this initiative will depend on clear, transparent rules and local government will to enforce them. But the potential is immense, particularly in infrastructure and technology – sectors poised for rapid development.

Reinvesting in China

In addition to procurement reform, the action plan also emphasizes the importance of reinvestment by foreign companies.

Encouraging foreign-invested companies to reinvest their profits within China is a move that signals a shift from a transactional, short-term investment approach to a more strategic, long-term relationship.

The government's offer of domestic loans for equity investment further facilitates this process, making it easier for foreign firms to scale up their operations in China.

However, reinvestment decisions will still depend on the stability of China's business environment and the ease of accessing these loans, especially as foreign investors carefully weigh the risk-benefit ratio.

From cost-based to innovation-driven

Perhaps the most profound shift for global companies, as implied in the action plan, is a shift from a cost-based investment approach to one that prioritizes innovation.

This change aligns with China's broader vision of "new quality productive forces" – that is, a transformation from an economy primarily driven by low-cost manufacturing to one that is high-tech, sustainable and innovation-driven.

In this new environment, local partnerships will play an even more critical role. Whether adopting a "China for China" approach, which taps into local ecosystems and logistics chains, or a "China for global" strategy, leveraging Chinese innovations for global markets, foreign companies must find the right partners to thrive.

The biopharma and green energy sectors already provide clear examples of how collaborations between foreign firms and Chinese companies can lead to groundbreaking products and services.

Notable examples include Johnson & Johnson and Innovent Biologics co-developing a PD-1 inhibitor to expand global cancer treatment access, and BASF partnering with Chinese firms to advance sustainable electric-vehicle battery materials.

For foreign investors, understanding the nuances of these partnerships is essential. Building strong local ties, rather than relying solely imported expertise, will be key to navigating China's increasingly complex market landscape.

Sectors to watch: consumer demand

The new action plan also places significant emphasis on sectors that cater to China's growing consumer demand in industries such as elderly care, culture and tourism, sports and finance.

As China's middle class continues to expand, these sectors are expected to become even more critical drivers of economic growth.

Foreign firms that align their strategies with China's evolving consumer market will find themselves well-positioned to capitalize on these opportunities.

The focus here is less on traditional export-driven industries and more on meeting the diverse needs of the domestic market.

Flexibility amid uncertainty

The global geopolitical landscape presents both risks and opportunities for foreign investors in China.

As international relations remain volatile, businesses must adjust their expectations and strategies. The rise of global innovation hubs outside traditional Western economies – including China – means that businesses need to look beyond traditional cost considerations.

For foreign investors, flexibility is paramount. As demonstrated by companies like DeepSeek, the next groundbreaker could emerge anywhere in China – whether in health care, education or advanced manufacturing. By fostering joint, strategic partnerships, global firms can enhance their ability to shape the future and benefit from its key industries.

Embracing the shift

China's 2025 action plan presents both vast opportunities and intricate challenges. While policy reforms signal a more open investment environment, success will depend on how effectively foreign companies navigate regulatory complexities and align their business models with China's vision for the future.

Those who seize the opportunity and embed themselves in China's evolving ecosystem will be best positioned to capitalize on this next phase of economic transformation.

(The author is an adjunct research fellow at the Research Center for Global Public Opinion of China, Shanghai International Studies University, and founding partner of 3am Consulting, a consultancy specializing in global communications.)