China emerged as the largest foreign direct investor in Pakistan during December 2025, reinforcing its position as the country’s most significant investment partner despite a notable slowdown in overall foreign inflows. According to data released by the State Bank of Pakistan, China recorded a net direct investment of $114.1 million during the month, followed by the Netherlands with $22 million and Hong Kong with $20.5 million.
On a cumulative basis, China also maintained its lead during the first half of fiscal year 2025-26. During 6MFY26, net foreign direct investment from China amounted to $422.9 million, making it the single largest contributor to Pakistan’s FDI inflows. Hong Kong followed with $163.8 million, while the United Arab Emirates ranked third with net investment of $112.2 million over the same period.
Despite China’s dominant position, overall foreign direct investment into Pakistan showed a significant contraction. Total FDI during 6MFY26 stood at $808.1 million, marking a sharp decline of 43.28 percent compared to $1.42 billion recorded in the corresponding period of last year. This contraction reflects ongoing challenges facing Pakistan’s investment climate, including macroeconomic pressures, policy uncertainty, and subdued global investment sentiment.
China accounted for more than half of Pakistan’s total direct investment during the period, with a share of 52.33 percent. However, investment from China declined substantially on a year-on-year basis. Net FDI from China fell by 41.56 percent compared to $723.7 million recorded during 6MFY25, highlighting a slowdown even among Pakistan’s most consistent investment partners.
Hong Kong’s contribution to net FDI stood at $163.8 million during 6MFY26, representing 20.27 percent of total inflows. This figure also reflected a year-on-year decline of 34.72 percent compared to $250.9 million in the same period last year. Similarly, investment from the UAE amounted to $112.2 million, accounting for 13.88 percent of total FDI, and declined by 30.7 percent year-on-year.
Other notable contributors during the first half of FY26 included Switzerland, the United Kingdom, and a group categorized as Others. Switzerland recorded net FDI of $106.8 million, while investment from the United Kingdom stood at $55.6 million. The category of Others contributed $77.9 million, indicating some diversification in the sources of foreign investment despite the overall downturn.
In contrast to foreign direct investment, foreign portfolio investment showed mixed trends. During December 2025, foreign portfolio investment registered a positive inflow of $13.1 million, reflecting limited buying interest in Pakistan’s equity market. However, on a cumulative basis, portfolio flows remained deeply negative. During 6MFY26, foreign portfolio investment recorded a net divestment of $600.6 million, compared to a divestment of $81.8 million in the same period last year.
Within portfolio flows, the category of Others emerged as the largest investor during December, with an investment of $2.2 million. On a cumulative basis, this group invested $21.5 million during 6MFY26, providing marginal support to portfolio inflows amid broader outflows.
When both direct and portfolio investments are combined, total foreign investment during December 2025 stood at a net outflow of $121.6 million. On a cumulative basis, total foreign investment during the first half of FY26 amounted to $207.4 million, a steep decline compared to $1.34 billion recorded in the corresponding period last year.
The latest SBP data underscores the persistent weakness in Pakistan’s foreign investment inflows, even as China continues to play a dominant role. Analysts note that reviving investment momentum will depend on sustained macroeconomic stability, structural reforms, and improved investor confidence, particularly at a time when regional peers are competing aggressively for limited global capital.
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