Foreign direct investment (FDI) in South Korea fell 14.6 percent year-on-year in the first half of 2025. The fall is largely attributable to a sharp decline in Chinese capital inflows amid rising global trade uncertainty triggered by U.S. tariff policy, the Ministry of Trade, Industry and Energy said on Thursday.

The FDI reached $13.1 billion for the January to June period, down from the same period a year earlier. The ministry attributed the decline to heightened geopolitical and economic uncertainty following the U.S. trade measures and the declaration of martial law in December 2024, both of which clouded cross-border investment sentiment.

“Investment from China saw a particularly steep drop, reflecting growing caution due to unresolved U.S. tariff risks,” a ministry official said.

Chinese investment in Korea fell 39 percent year-on-year to $1.82 billion, pushing China down to fourth place among major investors. It now trails behind the United States, the European Union, and Japan.

The decline marks a stark contrast to 2024, when China’s FDI in Korea surged 266 percent to $5.79 billion, making it the top foreign investor.

The manufacturing sector was also hit hard, with reported FDI down 34.5 percent to $5.33 billion. According to officials, the decline was driven by a global shift in capital toward the United States and a slowdown in domestic equipment investment, particularly in the electrical and electronics industries.

The government remains cautiously optimistic, projecting a recovery in the second half of the year. However, trade officials warned that if the tariff-related uncertainty persists, it may be difficult to meet the 2025 FDI target of $35 billion.

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