FDI in Asia: Resilient growth and shifting priorities

Asia's greenfield FDI landscape: Opportunities, shifts, and emerging leaders

Foreign Direct Investment (FDI) within Asia is undergoing significant transformation, marked by resilient growth, shifting regional dynamics, and evolving sectoral priorities. Drawing from our recent webinar, Exploring Opportunities in Asia — we have outlined some key insights illuminating the latest trends, challenges and opportunities shaping inbound and outbound greenfield FDI in the region.

Surge in inbound greenfield FDI project activity

2024 was a record-breaking year with over 17,000 greenfield FDI projects globally, with 22% targeting Asia — placing the region second only to Western Europe by project volume. Interestingly, while Western Europe saw a 12% decline in project activity (2024 vs 2019-23 average), Asia experienced over 33% growth, signalling a divergent trajectory.

Asia’s rebound from the pandemic has been particularly robust. Although COVID-19 had slashed project numbers in 2020 by 44%, the region not only recovered but surpassed pre-pandemic levels by 2023, with a further 5% growth in 2024. Capital investment in Asia totalled nearly $400 billion — 30% of the global share and a five-year high, although still below pre-COVID peaks.

Sectoral breakdown and growth drivers

In terms of sectors, software and IT services, along with business services, continue to lead by project numbers, despite slightly slower growth due to a global tech cooldown. Real estate and industrial equipment saw the fastest growth, driven by demand for business centre operations and general-purpose machinery. Capital-intensive sectors such as communications, metals, renewables, and semiconductors dominated in terms of investment value.

Regionally, India stood out as Asia’s FDI powerhouse, becoming the third-largest recipient of greenfield projects globally. It surpassed traditional giants like Germany and the UK. While China showed a 10% decline in project growth — reflecting waning manufacturing investments — South and Southeast Asian nations like Vietnam, Malaysia, and Indonesia posted strong gains. Vietnam in particular showed growth across both service and manufacturing sectors.

Additionally, Central Asia, especially Uzbekistan and Kazakhstan, is emerging rapidly, driven by renewables and industrial equipment investments. Though these countries aren’t top destinations by volume, their growth rate is among the highest.

Rise in outbound FDI and intra-regional trends

Asia is not just a major recipient but also an increasingly significant source of outbound FDI, accounting for 21% of global greenfield projects in 2024. The US remains the top destination, followed closely by the UAE — particularly fuelled by investments from India. Intra-regional outbound investment is also on the rise, with more than one-third of Asian outbound FDI staying within the region — the highest level since pre-COVID times.

Top source countries include China, which recently overtook Japan due to its push to internationalize and circumvent trade restrictions. India and Japan follow closely, all three ranking in the global top 10 for outbound FDI source markets. Chinese company strategy is exemplified by a recent billion-dollar EV battery announcement from Sunwoda in Thailand. The company has also recently opened plants in Hungary, Morocco and Vietnam.

Geopolitics and tariffs: risks and realignments

Geopolitical tensions — particularly US-China trade friction — are shaping investment flows. The "China+1" strategy, where companies diversify beyond China, is being replaced by a more aggressive "Not China" approach in some cases. Countries like Vietnam and Indonesia are reaping the benefits of this pivot.

Tariffs imposed by the US on Asian economies are leading to realignments. While these can dampen investor sentiment by increasing costs and regulatory burdens, they also encourage firms to bypass tariffs through local investment in affected markets — a practice known as "tariff hopping."

Policymaking is another driver of investor confidence. Countries like Vietnam and Indonesia have implemented reforms to attract FDI, such as Vietnam’s Investment & PPP law, its strategy for developing its semiconductor industry and the provision of equal treatment of foreign and domestic companies. In contrast, China maintains a “negative list” that still restricts foreign participation in several sectors.

Strategic shifts in investment motives

FDI decisions are increasingly driven by proximity to market and supply chain resilience rather than purely cost or size of domestic markets. There’s a notable 50% increase in projects citing proximity to customers as a key motivator. Additionally, investor focus is shifting toward tech innovation and specialized talent, particularly in AI and research-linked hubs.

Key opportunities within Asia

Semiconductors stand out as Asia’s most competitive subsector (globally). The region receives 2.5x times its fair share of global FDI, driven by India, China, and Taiwan. Other high-potential sectors include paints & coatings, data processing, and measuring & control instruments.

Final outlook

Asia’s FDI performance remains resilient but looming macroeconomic and geopolitical risks could test this momentum. Provisional Q1 2025 data signals a potential 10–15% dip in project activity. However, the region’s growing relevance in critical industries like semiconductors, renewables and digital infrastructure offers a strong foundation for continued investment — even in a turbulent global economy.

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