Xi Jinping has two big problems as a student of economics. One, he and his government seem to have no idea of what motivates people to invest and take economic risks. Two, Beijing seems unable to resist any exercise of power.
The CCP has long banned dissidents from leaving the country. Occasionally, bans were used against prominent businesspeople who criticized Party policies. But in the years since Xi has come to power, the authorities have passed more laws to allow such bans and have applied them more broadly. There are presently 15 such laws in place. Five of these have passed in just the last five years.
Only a week ago, the Counter-Espionage Law was amended to allow its greater exercise. Along with the Supervisory Law, the government now can deny exit to anyone—Chinese or foreign—under investigation for any civil or criminal transgression, even when not a suspect. What is more, the ban can also extend to family members.
The CCP seldom concerns itself with human rights when it wants to exercise its power, but the bullies in government might well consider the ill effects these policies will bring to China’s economy. The widespread application of such bans will certainly militate against Beijing’s clear desire to increase private investment by domestic Chinese firms or foreign firms. They may have the most profound effect on technologies and the high-value, sophisticated products that Beijing so wants for China.
On the domestic side of this equation, Beijing has expressed concern about a lack of business confidence. It is true that business enthusiasm for the future has suffered under the effects of “zero-COVID” lockdowns, debt overhangs left by failures in the property development sector, and rhetoric from Xi and others in government about the obligations of businesspeople to the Party as opposed to profits objectives.
Data show this state of affairs clearly. In an effort to stimulate growth, Beijing has increased public investment spending by 10 percent in the last year, but investment spending by private businesses has increased a paltry 0.6 percent. To help restore confidence and so change this picture, Xi has gone back on some of his earlier critical rhetoric of business and recently referred to entrepreneurs as “our own people.”
Exit bans belie such soft sentiments. Because civil cases are a standard aspect of competition and business expansion, the risk of such bans will help ensure that business remains reluctant to expand, even if those involved have no plans to travel abroad.
No manager, for example, wants his or her employee to suffer the fate of the Irish national, Richard O’Halloran, whose firm sent him to China in 2019 to settle a civil case that predates his employment, and who was forbidden to leave China for three years until 2022 when his firm finally agreed to pay Chinese investors.
Why should foreign investors take the risk when there are attractive alternatives elsewhere in Asia or in their home market that do not threaten what is effectively a hostage situation?
Over the years, Xi has made it clear that he wants to exert Party control more thoroughly. He has said that China has passed a development stage and can now re-exert Marxist control. He and his colleagues in the Forbidden City no doubt see the exit bans as part of such a program. But like so much else in Marxism, these bans are bad for growth, the economy, and China’s prosperity. Xi and the CCP might care—but not enough to change their ways.
