Sinobravo Observation | Two-Way Cross-Border Capital Amidst Geopolitical Turbulence

Global capital flows are currently in a rare period of high volatility. On one side, protectionism, geopolitical conflicts, energy price fluctuations, and the restructuring of global supply chains continue to compound; on the other, diverging growth among major economies, fragile market expectations, and increasingly cautious cross-border investment. Against this backdrop, the market's primary concern is no longer merely "whether capital will flow," but rather "where capital will flow, and what it will rely on to find certainty."

For China, this complex external environment is not unfamiliar. The 2026 Government Work Report clearly points out that "the impact of changes in the external environment is deepening, geopolitical risks are persisting and rising, the world economy lacks momentum, and multilateralism and free trade are under severe pressure." However, it also emphasizes that "the conditions supporting China's long-term economic growth and the underlying trend of the economy have not changed." The report proposes to "further expand high-level opening-up," "expand two-way investment cooperation," "guide the rational and orderly cross-border layout of industrial and supply chains," while "improving the comprehensive overseas service system, and strengthening risk prevention and control for outbound investment and protection of overseas interests." This indicates that amid rising external uncertainty, China is not turning to contraction, but is more explicitly leveraging high-level opening-up, utilizing foreign investment, and supporting the global layout of enterprises as key measures to cope with the complex situation.

This reflects not just a policy orientation, but a clearer developmental assessment: amidst increasing global systemic turbulence, China still aims to leverage its own stability, its ultra-large market, and its complete industrial system to provide a predictable foothold for global capital, and to support Chinese enterprises' higher-level participation in the global division of labor and global governance. In other words, two-way cross-border capital flows will not cease because of geopolitics. What is truly changing is the increasing emphasis capital places on "security," "resilience," and "institutional certainty."

Internal Certainty Offsets External Uncertainty: China as the World Economy's "Stabilizer"

The recent escalation of the Iran situation is a typical window to understand this change. From March 8-9, reports from various international media and official sources indicated escalating conflict between the US/Israel and Iran, with a significant rise in the risk of obstructing passage through the Strait of Hormuz. International oil prices once surged above $100 per barrel, and market concerns about Middle Eastern energy supply, maritime security, and global inflation quickly escalated.

For global capital, the impact of such events never stays solely at the energy level; it quickly transmits to logistics costs, insurance costs, exchange rate fluctuations, asset pricing, and the risk assessment of corporate overseas projects. Particularly for cross-border investment, investors will pay more attention to host country political security, payment and settlement convenience, supply chain alternative capacity, and policy continuity.

Precisely because of this, in the current global environment, China's significance becomes even more pronounced. China cannot insulate itself from global shocks, but it can provide a relatively stable anchor for growth, industry, and policy amidst global volatility. The 2026 Government Work Report sets an annual economic growth target of 4.5% to 5%, and emphasizes implementing more proactive and effective macroeconomic policies, continuously expanding domestic demand, promoting the development of a unified national market, and stabilizing enterprises, markets, and expectations.

The IMF also projected in January that the global economy will grow by about 3.3% in 2026, while the Chinese economy will maintain a large size and stable growth, providing important support for global demand and supply chain stability. In this sense, China's role as a "stabilizer for the world economy" comes not only from its large scale, but also from its comprehensive ability to maintain growth, stabilize manufacturing, receive investment, and restore expectations at a time of rising global uncertainty.

Unwavering High-Level Opening-Up: Foreign Investment Prospects in China Remain Broad

This assessment is first reflected in the prospects for foreign investment in China. Over the past few years, discussions on foreign investment have often featured two extreme views: one argues that foreign investment will inevitably contract, the other that China's market attractiveness remains completely unaffected. In reality, a judgment closer to the truth is: foreign capital will not simply "leave China," but will continue to position itself in China in a more cautious and structured manner. The Government Work Report provides a resounding and clear answer: China's door to the world will not close; it will only open even wider. In the section on "further expanding high-level opening-up," the report proposes a series of highly substantive measures, strongly supporting the judgment that "prospects for foreign investment in China are positive":

Expanding Market Access: Explicitly proposes to "focus on the service sector to expand areas for market access and opening," naming cutting-edge industries like value-added telecommunications and biotechnology, and to "expand opening-up in the digital sector in an orderly manner," while "reducing items on the negative list for cross-border service trade." This means foreign investors will have opportunities to enter more high-value-added, high-growth blue ocean markets.

Guaranteeing National Treatment: The report emphasizes "guaranteeing national treatment for foreign-funded enterprises" and "implementing the new version of the Catalogue of Encouraged Industries for Foreign Investment." This ensures, at the legal and policy levels, that foreign-funded enterprises can participate in market competition fairly and enjoy equal development opportunities.

Optimizing the Business Environment: The report proposes to "polish the 'Invest in China' brand" and enhance service guarantees for foreign-funded enterprises. This indicates China is shifting from "attracting investment" to "accommodating and stabilizing business," committed to providing a long-term, stable, and predictable development environment for foreign capital.

This means that China's current attractiveness to foreign capital is no longer primarily based on low-cost advantages, but is increasingly built upon market scale, industrial ecosystems, innovation application scenarios, and policy optimization.

For foreign enterprises, the core attractiveness of the Chinese market is reflected in at least three aspects. First, China remains one of the few large economies globally that possesses an ultra-large market, a complete industrial chain, and rapid technological iteration capabilities. Second, against the backdrop of global supply chain restructuring, localized strategies of "in China, for China" and "in China, serving Asia" have become practical choices for multinational corporations to enhance resilience. Third, alongside the opening of the service sector, the development of the digital economy, green transformation, and the upgrading of high-end manufacturing, opportunities for foreign capital in China are increasingly concentrated in high-value-added, high-tech, and high-quality development-related fields, rather than traditional cost arbitrage. In other words, the prospects for foreign capital in China remain positive, but the logic has shifted from "whether to enter China" to "how to embed more deeply in China."

From "Going Global" to "Going In": Corporate Globalization is a High-Level Path to Participating in Global Governance

Simultaneously, the complexification of the external situation does not mean Chinese enterprises' "Going Global" will slow down. On the contrary, it will push Chinese enterprises to go global in a more systematic and mature manner. The 2026 Government Work Report does not simply equate "Going Global" with capacity transfer or market expansion, but views it within the broader framework of opening up: on one hand, it emphasizes "guiding enterprises to optimize their global market layouts," and on the other, it emphasizes "improving the comprehensive overseas service system, strengthening risk prevention and control for outbound investment, and protecting overseas interests," while continuing to promote high-quality Belt and Road cooperation and expanding practical cooperation in emerging areas.

This indicates that policymakers' understanding of corporate globalization is shifting from scale expansion to building systemic capabilities, and from a single-project mindset to long-term global operational capacity.

This is particularly important for Chinese enterprises participating in global governance. Today's "Going Global" is no longer just about simply setting up factories overseas, selling products, or making acquisitions. It means enterprises must participate more deeply in local industrial development, job creation, technological cooperation, ESG governance, supply chain standards, digital rules, and regional public affairs coordination. As barriers rise in some Western markets and traditional paths of globalization are obstructed, the space for Chinese enterprises to position themselves in regions like ASEAN, the Middle East, Latin America, and Africa is actually expanding. Such positioning itself will become an important part of China's participation in international economic governance, industrial governance, and regional cooperation. In other words, "Going Global" has not stalled, but has entered a new stage under higher-risk conditions, demanding greater emphasis on compliance, resilience, and governance capabilities.

Balancing Development and Security: The Core Proposition for Two-Way Cross-Border Capital

Of course, it must also be recognized that the constraints facing current two-way cross-border capital flows are real. What the Iran situation reflects is not just a single-point risk in the Middle East, but the fact that global geopolitics is shifting from "localized disturbances" to "systemic spillovers." Energy prices, shipping security, payment settlements, secondary sanctions, export controls, data compliance, and political changes in host countries can all directly impact corporate cross-border investment decisions. The Government Work Report also clearly proposes to "better balance development and security" and strengthen risk prevention and control for outbound investment and protection of overseas interests.

This means that in the future, whether for foreign capital entering China or for Chinese enterprises going global, security and development will be placed in equally important positions. Capital will not stop crossing borders, but it will place greater importance on the institutional stability, supply chain security, and policy predictability of destinations.

It is precisely against this backdrop that China's policy signals are particularly crucial. Faced with external uncertainty, China is not responding with closure, but continues to emphasize opening-up, reform, and two-way investment cooperation. This in itself is a policy expression aimed at stabilizing expectations. For foreign capital, China remains one of the few markets globally that can simultaneously offer growth space, industrial support, and policy continuity. For Chinese enterprises, globalization remains a necessary path to enhance competitiveness, diversify risks, participate in global resource allocation, and shape rules. What truly needs adjustment is not the direction of opening-up, but rather the methods, pace, and risk management framework for cross-border capital operations.

In this sense, the current complex geopolitical landscape will not alter the general direction of China's two-way cross-border capital flows. On the contrary, it will make China's role as a "stabilizer" even more prominent. China's stability is not static stagnation; it is the continuation of reform, maintenance of openness, stabilization of growth, support for innovation, and enhancement of governance capabilities in a complex environment. Precisely because of this, China remains attractive to foreign capital, Chinese enterprises still have vast space to "go global," and two-way cross-border capital flows will continue, amidst a new round of global restructuring, to serve as an important bridge connecting China to the world and to its participation in global governance.

Conclusion

The more turbulent the world, the more capital values certainty.

And what China offers today is precisely that certainty: the certainty of growth, the certainty of the market, the certainty of industry, and the certainty of the direction of opening-up.

Therefore, to assess two-way cross-border capital flows in the period ahead, one should not only see the disturbances brought by geopolitics, but also see that, as global uncertainty rises, China can still respond to external shocks with stable development, attract foreign capital with high-level opening-up, and participate in global governance by "Going Global" with higher quality.

This is precisely the practical significance of China's role as a stabilizer for the world economy, and the fundamental logic behind why foreign capital continues to favor China and Chinese enterprises continue to move forward globally.

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