In his speech addressing an exclusive banquet in the US, President Xi Jinping affirmed that “the world needs China and the United States to work together for a better future”. He called on both parties to avoid seeing “the other side as a primary competitor”.
His conciliatory remarks appear to put to rest the notion that the highest echelons of China’s leadership no longer value their long-standing partnership with the West as the Global South continues to rise. While Southeast Asia and the Gulf are significant to China’s vision of a multipolar world order, the US and Europe remain instrumental economic and financial partners from which decoupling is not an option.
The olive branch extended in San Francisco will go some way to assuaging the concerns of foreign investors and businesses about operating in China. Beijing recorded its first quarterly deficit in foreign direct investment (FDI) in November. This should be put in context, though: as of 2021, inbound investment comprised less than 2 per cent of national GDP.
Despite the difficulties involved, some US and European firms are shifting investment from China to other developing markets, such as India and Vietnam. Those who dismiss the importance of this often invoke the “West is in decline, East is on the rise” mantra to suggest China doesn’t care about dwindling capital inflows.
However, this ignores the fact that FDI is often viewed as a bellwether for economic health and credibility. Domestic entrepreneurs and private investors also turn to FDI volumes in deciding capital allocation and business plans. It is not too late for Beijing to embrace pragmatic measures aimed at arresting the free fall in confidence and repairing China’s attractiveness for international investors.
03:47
‘Door to China-US relations will not be closed again’: Xi Jinping offers assurances to US businesses
‘Door to China-US relations will not be closed again’: Xi Jinping offers assurances to US businesses
First, too much focus on security does not help attract and retain foreign businesses and expatriate workers. National security is a prerequisite for stability and social order, but securitisation of the social and business spheres can only be to the detriment of economic stability.
Tsinghua University scholar Da Wei has warned that by viewing all matters through a security lens, resources will inadvertently be squandered by authorities. They unduly restrict much-needed people-to-people exchanges such as investor calls, meetings between deal brokers and frank dialogue between the government and critics of its economic policies.
The recent wave of exit bans, counter-espionage arrests and office raids at consultancy firms could be based on reasonable legal grounds. Even so, the authorities would benefit from clarifying the motivation and rationale for their actions to calm the nerves of investors who fear they could be ensnared in the process.
The narrative that China is an unsafe place to do business remains detrimental in attracting foreign multinationals and capital. Such a view can only be dispelled through consistent communication clearly delineating what are legally permitted actions, coupled with invitations to China for people to see the country for themselves. The best China stories are those experienced first-hand.
02:28
Beijing raids offices of consulting firm Capvision in widening crackdown over national security
Beijing raids offices of consulting firm Capvision in widening crackdown over national security
Second, China’s data regulations must be more comprehensible and streamlined. A recent poll by the European Union Chamber of Commerce revealed that 81 per cent of companies wanted further clarification on what “important data” meant when it comes to cross-border data transfers. Increasing compliance costs and operational uncertainty have nudged prospective European investors away from China.
Beijing must also increase transparent and open access to data for foreign investors. This summer, China stopped publishing unemployment figures for the 16-24 and 25-59 age groups. The explanation provided was that the government needed to improve labour-force survey statistics, but the equity market was unimpressed as investors found it increasingly difficult to source accurate information. Going forward, the National Bureau of Statistics would benefit from working more closely with provincial and municipal counterparts in publishing vetted, comprehensive data sets.
Bureaucrats and officials can afford to have more confidence in the fundamental resilience of the Chinese economy and the ability of the market to react proportionately. Seasoned operators will recognise that many value stocks are a real bargain now, and we should not conflate cyclical effects with structural malaise.
Furthermore, transparently communicating both the shortcomings and strengths of policymaking would assuage worries that the government has something to hide.
Third, China should aim to minimise the sense of policy and institutional uncertainty that has caused foreign businesses and financiers to become reticent to commit to any particular sector. For instance, Beijing must offer clear and unambiguous statements concerning the status of its regulatory campaigns in the digital economy and ease the bureaucratic restrictions that have significantly raised overhead costs.
Reining in the excesses of businesses is a noble task, but it would be more effective with an explicit and measured road map. That way, investors could determine when to enter or exit the market. As a special administrative region, Hong Kong has a crucial role to play here.
Hong Kong’s rule of law underpins the enduring values of its common law jurisdiction: rigour, fairness and international connectivity. Beijing should seek to shore up the judicial autonomy and international accreditation of our courts, as well as embrace the fact that judges’ ability to rule freely – whether in favour of or against the government – is a strength, not a weakness.
China has a bright economic future. Yet, in ensuring that its growth continues to benefit everyone, Beijing must act pragmatically and position itself as an attractive destination for investment for as many as possible.
Brian Wong is an assistant professor in philosophy at the University of Hong Kong, and a Rhodes Scholar and adviser on strategy for the Oxford Global Society
.png?itok=bcjjKRme&v=1692256346)
