American CEOs Who Dined With China’s Xi Are Moving Businesses Out of China: Analysts

People demonstrate against Chinese leader Xi Jinping as he meets with U.S. President Joe Biden during the Asia-Pacific Economic Cooperation (APEC) Leaders' Week, in Woodside, Calif., on Nov. 15, 2023. Gilles Clarenne/AFP via Getty Images

During the Asia-Pacific Economic Cooperation meeting in San Francisco from Nov. 15–17, Chinese leader Xi Jinping had dinner with hundreds of top American CEOs, hoping that these business and tech executives would become mediators in the strained U.S.–China relationship.

But the grim reality of Beijing’s suppression of foreign companies has prompted these CEOs to pull their businesses out of China.

On Nov. 15, Mr. Xi attended a dinner event with more than 300 U.S. corporate leaders and influential politicians at the Hyatt Regency Hotel in San Francisco.

In his speech, he first pointed out that the primary question facing U.S.–China relations is, “Are we adversaries or partners?” Then he claimed that China is willing to be “a partner and a friend” of the United States.

Anders Corr, the founder of Corr Analytics Inc. and publisher of the Journal of Political Risk, told The Epoch Times that the CEOs, who paid tens of thousands of dollars to attend the dinner, did not hear what they wanted to hear: How the Chinese Communist Party (CCP) will improve the increasingly harsh operating environment for foreign companies in China.

“In the speech, Xi did not acknowledge the deteriorating business environment in China or his increasing control of the economy. This appears to be non-negotiable on his part, which will likely lead U.S. and other businesses to continue to attempt to depart China.”

In April this year, the CCP’s police force suddenly raided the offices of two U.S. consulting firms—Bain & Co. and Capvision Group—as well as the due diligence firm Mintz Group. In May, the regime banned the use of products from Micron Technology Inc., the largest memory chip manufacturer in the United States, in computers handling so-called “sensitive information.”

Lucia Dunn, a professor of economics at Ohio State University, told The Epoch Times that she believes Mr. Xi’s lack of commitment at the dinner is actually a calculated move.

“I am sure Xi and his advisers have a strategy for dealing with Western CEOs. A lot of the business news coming out of China recently suggests that it may have a long-run plan to scale back or even eliminate foreign companies from China. So of course, Xi would not talk about this in a straightforward way because he needs those foreign companies in the short-run to bolster the Chinese economy. He would not want to set off any alarms in their minds, but he did not want to make any promises either,” she said.

Extensive Retreat of Foreign Funds

In the first seven months of this year, more than three-quarters of the foreign capital flowing into China’s stock market left, with global investors selling more than $25 billion worth of shares.

By the end of September, foreign companies had withdrawn a total of more than $160 billion in profits from China for six consecutive quarters, causing total foreign direct investment in China to fall in Q3 for the first time in 25 years.

BlackRock CEO Larry Fink sat at the same dining table with Mr. Xi as a distinguished guest. However, just two months ago, BlackRock Global Fund decided to terminate the China Flexible Equity Fund, citing a lack of new investor interest. But one reason that was not stated is that the fund is under investigation by a U.S. House select committee for allegedly funneling U.S. investments into shares of blacklisted Chinese companies.

In addition, Wall Street giant Vanguard Group also informed Chinese authorities earlier this year that it was closing all its offices in China.

“Western financial companies are beginning to cut ties to China because of all the uncertainty about what is happening there,“ Ms. Dunn said. ”These funds deal in uncertainty and risks every day, but they have metrics they use for assessing things, and they will pull back when the uncertainty or risk levels get too high.

“Obviously with everything happening in the world, uncertainty about what China may do with Taiwan, Russia, Ukraine, the Middle East, etc. has probably changed the metric for many financial firms. So the downside to their dealings with China is probably looming larger in their minds,” she added.

US Moving Manufacturing out of China

U.S. manufacturing companies are also exiting China.

Intel said it is contemplating relocating some of its manufacturing operations from China to the United States to comply with U.S. government regulations. Similarly, Microsoft is exploring the possibility of transferring some of its manufacturing base from China to various locations in Europe, aiming to mitigate supply chain risks. Dell announced that it will shift some manufacturing activities from China to Vietnam and Mexico to reduce costs and enhance overall efficiency.

Ms. Dunn said the situation in China has many similarities to what happened with the old Soviet Union.

“When that fell apart in the late 20th century, many Western companies rushed to open plants and facilities there because they are always looking for new markets to expand to. However, when relations with Russia soured, many saw that there was no future for them there and pulled out even though they lost a lot of money doing that.

“In the early days of China opening up, Western companies rushed to do business and set up plants there. They were lured by the elusive hope of getting access to the billion-plus consumer market there as well as cheap manufacturing costs. Both of those factors are beginning to fade,” she said.

Worse still, the CCP has tightened its control, especially over the financial and private sectors.

“Some statements Xi has made seem to indicate that going forward he wants everything to have ‘Chinese characteristics.’ He doesn’t give a lot of details to these statements, but many think it means that Western businesses can no long count on China as a source profitable operations,” Ms. Dunn said.

The exodus of foreign companies could lead to the closure of factories and enterprises, as well as massive layoffs.

According to official estimates, foreign-invested enterprises in China have absorbed more than 45 million people in direct employment. Together with the suppliers and upstream and downstream enterprises that rely on foreign investment for their survival, hundreds of millions of Chinese people are supported by foreign companies.

China’s official data states that the unemployment rate for young people aged 16 to 24 in China reached 19.9 percent in August last year. However, Zhang Dandan, a scholar at Beijing University, said that if the around 16 million individuals—those who choose not to work and live off their parents—are all counted as unemployed, the actual youth unemployment rate in March this year was as high as 46.5 percent.

US–China Friendship Claim

In a bid to retain foreign investment to feed China’s economy, Mr. Xi made a gesture of goodwill to the CEOs at the San Francisco banquet, claiming that China is willing to be a friend with the United States.

He also said, “China deeply sympathizes with the American people, especially the youth, for the suffering caused by fentanyl.”

Mr. Corr debunked this as a lie.

“Xi lied throughout his speech, including when he claimed to be a friend to the United States and to have empathy for those Americans affected by fentanyl. His use of fentanyl as a bargaining point with [U.S. President Joe] Biden over Taiwan is the most obvious case in point,” he said.

On Aug. 2 last year, following then-House Speaker Nancy Pelosi’s (D-Calif.) visit to Taiwan, Beijing imposed a series of retaliatory measures against the United States, including suspending cooperation with Washington on curbing drug smuggling.

“It is becoming increasingly clear that the CCP is an enemy of democracies and sovereign states worldwide, with whom it sees itself in competition for global hegemony. The CCP attempts to hide its efforts to gain hegemony through words of friendship in order to buy time, but the lies are obvious to anyone paying attention,” Mr. Corr said.

Ms. Dunn shared similar views, saying that the proof is in the pudding.

“He has been very slow to help the U.S. with the fentanyl crisis which has been such a tragedy for Americans,” she said.

She further pointed out that as the CCP’s top leader, Mr. Xi has not taken any action to address the crime of live organ harvesting, an unprecedented evil against humanity.

“If Xi continues to disregard the important moral principles that Western civilization is based upon, then I can’t see much future for the idea of partnership between the U.S. and communist China,” she said.