The ruling Chinese Communist Party (CCP) has set attracting foreign investment as an important goal as it discussed a slumping Chinese economy during its Two Sessions top political meetings that concluded last week.
But the outside world, including the U.S. ambassador to China, has expressed skepticism towards the CCP’s goal due to its conflicting policies.
In the CCP’s government work report from the Two Sessions, the party set the promotion of foreign trade and increasing efforts to attract foreign investment as an important task.
Since the international community’s response to China’s mishandling of the COVID-19 pandemic, the Chinese economy has continued to decline. The Chinese real estate market, which accounts for nearly 30 percent of China’s GDP, has been in a long-term slump. The youth unemployment rate remains at a record high, domestic demand is sluggish, foreign investment has withdrawn, and industrial activity and a supply chain exodus from China to other countries continues to impact the Chinese economy. In particular, major Chinese real estate companies have defaulted one after another, making the situation even worse for the CCP.
The communist regime tried to attract foreign investment to help with its domestic economic difficulties during the CCP’s Two Sessions. The authorities stated that “we must focus on institutional opening up to promote high-level financial opening up to the outside world.” Meanwhile, the CCP announced that relevant restrictive measures for the financial industry in the “Negative List for Foreign Investment Access” has been completely cleared, lifting many restrictions for foreign firms. Now, the business scope of foreign-funded banks and insurance institutions is exactly the same as that of their China-based counterparts.
However, international financial firms have continued to downsize their businesses in China and withdraw their investments. Morgan Stanley IM China has laid off 15 employees since last December amid shrinking asset volumes and operating losses.
Sharmin Mossavar-Rahmani, chief investment officer of Goldman Sachs Group’s wealth management business, advised investors earlier this month, “Our view is that one should not invest in China,” citing a host of reasons, including “a lack of clarity on China’s policymaking” and “patchy economic data.”
Ambassador Burns Skeptical
U.S. ambassador to China Nicholas Burns said on March 14 that American companies operating in China are hesitant to increase their Chinese investments because the CCP authorities have been sending conflicting signals.
“Some senior Chinese government officials say private-sector investment is welcome in China, your investment will be protected. But then these companies are also hearing a different message,” he said in an interview with Bloomberg, citing the raids against U.S. auditing firms last year and China’s sweeping new counter-espionage law as factors that deter investment.
“I think the voices that they’re hearing from the government here in China about national security—they’re the strongest and loudest voices right now,” he said.
Mr. Burns added, “A lot of companies don’t know what the direction of the economy is here, and where policy, guidelines, and parameters will be. And so they’re not quite sure if they make a major investment, whether that’s going to be a rational decision. So a lot of people are sitting on their money. Very few companies are leaving this market. It’s such a big market, an important market. But a lot of companies have Plan Bs as well.”
