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Foreign Direct Investment in California
California’s major cities have seen a decline in popularity with foreign investors due to economic uncertainty, high taxes, and restrictions on Chinese outbound investments. Los Angeles, in particular, fell 10 places in the FT-Nikkei ranking of U.S. cities for foreign businesses, now at 37th place out of 91. The number of investment projects by foreign-owned enterprises in LA hit a five-year low in 2022, with only 20 announced in the first seven months of 2023.

California, though still the world’s fifth-largest economy, saw no major cities rank in the top 20 U.S. hubs for foreign businesses. High living costs, taxes, and a demanding regulatory environment have driven some businesses to states like Texas and Florida. However, the state did see a rebound in foreign direct investment in 2022, with significant investments from Japan, the UK, France, and Canada, among others.

 Impact of Chinese Investment Decline
San Francisco and San Diego also dropped in the rankings, with foreign direct investment in the Bay Area falling significantly post-COVID-19. Smaller Californian cities like Sacramento, Irvine, and Anaheim showed improvement but still rank low overall. Los Angeles, once a top destination for Chinese investment, has been hit hard by China’s capital flow restrictions and rising geopolitical tensions, leading to a 14% decline in Chinese-owned enterprises in the state since 2021.

Despite some ongoing investments, the scale has decreased, leaving LA more dependent on Japanese investment, especially as the city prepares for the 2026 FIFA World Cup and the 2028 Summer Olympics.