This content was originally published by Radio Free Asia, and it is now licensed for reprint.
In response to recent declines in foreign investment, China has stated it will” stabilize” it, but researchers say Premier Li Qiang’s announcement on Monday is unlikely to lead to real policy changes.
Li stated at the State Council professional meeting on Monday that “foreign businesses play an important role in work creation, export stabilization, and professional upgrading,” according to state news agency Xinhua.
Foreign direct investment in China has weakened since the ending of COVID-19 constraints, and has been flagged as a key element in , Beijing’s force to kick-start flagging economic growth.
Li called for “more sensible, effective measures to maintain existing international funding and grow new expense”, the Xinhua report said.
The conference called for a pilot programme that would “encouraged foreign investment to accomplish equity investment in China” and “encouraged foreign investors to do so,” the organization reported.
Inbound foreign direct investment, or FDI, fell by 13.7 % in 2023 to US$ 163 billion, according to statistics from the Ministry of Commerce, although the country remained the number four place for investors in the world, according to the International Monetary Fund.
Investor confidence has been hit by” slower-than-expected economic recovery following COVID-19, lower prospects for long-term growth, capital controls, lack of policy predictability and regulatory transparency, and conflicts in the U. S. China relationship”, according to the U. S. State Department’s 2024 Investment Climate Statement.
The State Council conference called for “domestic and international companies to be treated equally in government sourcing,” as well as the need to expand funding programs for international businesses, according to Xinhua.
China is the 11th most repressive business out of 89 nations surveyed by the Organization for Economic Cooperation and Development, which the State Department claims reflects “longstanding restrictions on investment in crucial areas and unpredictable regulatory police.”
” Obstacles include foreign ownership caps, requirements to form joint venture ( JV ) partnerships with local businesses, industrial policies to develop indigenous capacity or technological self-sufficiency, licensing tied to localization requirements, and pressures to transfer technology as a prerequisite for gaining market access,” according to the report.
Meetings are only slogans, according to some.
Analysts predicted that Li will struggle to turn things around, especially now that Xi Jinping has the final say in monetary policy.
Current affairs expert Zheng Xuguang told RFA Mandarin in a recent meeting that” all of Li Qiang’s State Council meetings are just phrases because he’s not allowed to change Xi Jinping’s broader guidelines.”
He said Xi seems proof to calling for him to relinquish , top-down power of the business, as soon supreme leader Deng Xiaoping did from 1979, unleashing decades of rapid economic development.
No one is even considering that right now, and Xi Jinping appears to lack resolve when it comes to resolving the issue of opening doors to foreign investment, Zheng said.
In the eastern area of Nanchang, honorary chairman of the Taiwanese Business Association Wang En-kuo said tariffs on imports to the US are a major factor in turning aside foreign investors from China.
” Everyone knows that these are just statements, that didn’t have any true result”, Wang told RFA Mandarin in a recent interview. ” That’s because China’s fundamental problems haven’t been solved”.
” For foreign-invested enterprises that produce in China for export, tariffs are the biggest consideration”, Wang said. ” Export-oriented foreign investment will undoubtedly think about looking for other places to cut costs for production or tariffs.”
Even domestic Chinese-focused foreign-invested businesses are in stark opposition to Chinese businesses.
” If they can’t make a profit, they’ll have to leave”, Wang said.
Other destinations
And it’s not just foreign companies that are leaving.
South Korea’s Ministry of Trade, Industry and Energy has said Chinese companies are currently setting up in South Korea at the rate of one a day, according to a Feb. 10 report by BusinessKorea.
It cited the Daejeon-based semiconductor and display manufacturing company that was recently acquired by a Chinese company. While most of the company’s employees are still Korean, more than 90 % of the shares are now controlled by Chinese capital, the report said, suggesting it was a form of “identity laundering” aimed at circumventing U. S. tariffs on Chinese-made goods.
Vietnam is currently the most popular destination for Chinese companies looking to relocate, in Wang’s opinion.
” Chinese exports to Vietnam grew by more than 25 % year-on-year in the first three quarters of 2024, and almost all of]the orders ] were from Chinese companies”, Wang said.
The Chinese government doesn’t worry about local businesses leaving because they still import raw materials from China even if they relocate abroad.
Zheng claimed that Chinese businesses have been moving their manufacturing facilities while importing raw materials and spare parts from China.
” Companies may be able to avoid the 10 % tariff by relocating to other countries, as]U. S. President ] Trump’s tariffs haven’t hit those places yet”, he said. ” But Trump’s policy is very clear: tariffs will be imposed on all countries”.
He said Vietnam is a salient example.
” Exports from Vietnam and Mexico have increased significantly, which is actually the effect of Chinese companies moving there”, Zheng said. ” If Trump imposes tariffs across the board, then it’ll be pointless to relocate production facilities”.
China’s General Administration of Customs has said that Chinese exports to Vietnam will grow by nearly 18 % in 2024 to a record high of US$ 162 billion, Bloomberg reported, while exports to Japan totaled US$ 152 billion during the same period.
