China is rolling out the red carpet for foreign investors, but can it calm nerves?
China’s leaders have been going all out to reassure investors that it is committed to reform and opening up. There are reasons to believe they are serious this time
The wisdom of Chinese philosopher Hu Shih from more than 100 years ago comes to mind: “More study of problems, less talk of ‘isms’”
Is China back in business after nearly three years of self-imposed isolation and amid rising geopolitical tensions with the West?
That’s the million-dollar question on the minds of foreign thought leaders and CEOs of multinationals, including Apple’s Tim Cook, who converged onChina last week on a fact-finding mission to assess the country’s future direction after its sudden reopening in December last year and the election of a new cabinet in March.
China’s leaders clearly know what is at stake. The new premier Li Qiang reassured foreign investors that the country would remain open “no matter what happens”.
Ding Xuexiang, the new executive vice-premier, said China’s chosen path of reform and opening up was as indispensable as the human need to eat, drink, breathe, and sleep. Commerce Minister Wang Wentao said China-based foreign firms were not guests, but family.
While China has rolled out the red carpet for foreign executives, scepticism remains. Indeed, the fact that Chinese officials went out of their way to reiterate the country’s more than 40-year-old open-door policy says a lot about how investor sentiment has changed.
Are China’s leaders for real? That’s the question I was asked by several foreign executives. After all, over the past decade, China has publicly pledged it would “unswervingly” stick to the path of reform and opening up, but in reality it has gone backwards and turned inward.
At home, ultra-left nationalism has underpinned a two-year regulatory crackdown on the private sector and damaged business confidence. Abroad, Beijing’s assertive foreign policy and war of words with Washington over a litany of issues, from human rights to Taiwan, have heightened foreign investors’ concerns.
To make matters worse, China’s zero-Covid policy dampened consumer demand, disrupted supply chains and weakened expectations.
But there are reasons to believe China’s leaders are for real this time. Their change of tune is born of necessity because China’s economy faces a tough recovery. After clocking economic growth of 3 per cent last year, China has set a growth target of “around 5 per cent” for 2023, a goal it will be hard-pressed to achieve without the full support of the private sector and foreign firms.
Private businesses contribute about 50 per cent of China’s annual tax revenues and 60 per cent of annual gross domestic product. More importantly, the private sector accounts for 80 per cent of urban employment; over 400 million people are employed by private companies.
At a time when youth unemployment is in the double digits, the government needs the private sector more than ever to accommodate 12 million new jobseekers this year.
Since he was installed as premier in March, Li has made it clear he will focus on reviving the economy. Drawing on his experience in Zhejiang and Jiangsu provinces where the private sector has thrived, he has publicly expressed support for the sector, promising all types of companies would be treated equally.
It was hardly a coincidence that Jack Ma, co-founder of e-commerce giant Alibaba Group, which owns the Post, returned to China after travelling overseas for over a year. Ma had largely disappeared from public life after criticising Chinese regulators in a speech in 2020.
Many in the international business community have viewed Ma’s absence from public activity as a sign of China’s unfavourable treatment of the private sector. Li reportedly personally lobbied Ma, believing his return to China would help shore up confidence among entrepreneurs and reassure foreign investors.
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After long absence from China, Jack Ma makes rare appearance to visit school in Hangzhou
After long absence from China, Jack Ma makes rare appearance to visit school in Hangzhou
While Ma’s return has been welcomed by investors, evident in a rise of Alibaba’s shares, China must do more to put jittery entrepreneurs at ease.
For instance, Chinese officials have indicated that the regulatory crackdowns on the private sector – ranging from education to real estate to internet platforms – have ended, but the regulations have not really changed.
Moreover, legal protection for private businessmen and their business interests remains one of Chinese entrepreneurs’ biggest concerns.
For instance, in February, China Renaissance Holdings announced it was unable to contact its CEO Bao Fan, a star tech-sector deal-maker. It was 10 days before the company could confirm that he was assisting with a government probe. Nearly two months later, officials have not provided details about the investigation or Bao’s whereabouts.
Bao Fan, founder and CEO of China Renaissance, at the company’s office in West Kowloon, Hong Kong, on May 28, 2019. Photo: Nora Tam
Now there are signs that the authorities are considering more steps to allay entrepreneurs’ concerns about the legal and investment climate in the country.
On Tuesday, the Hainan provincial government made public a directive that the judicial authorities should avoid detaining, charging or jailing entrepreneurs involved in criminal cases. The news quickly sparked online debate over the significance and implications of the directive.
Some commentators pointed out that a similar call was made by Zhang Jun, then China’s top prosecutor, in 2019, but that did not prevent Bao’s disappearance. Others have argued that Hainan’s directive could be a sign of Beijing’s renewed push to provide better legal protection to entrepreneurs. A few commentators said private businessmen did not need special treatment but a transparent and fair environment where their personal and property rights would be protected.
On the same day, the Cyberspace Administration of China said it would crack down on malicious online comments which discredited entrepreneurs and their businesses – another major concern of the private sector. Over the past few years, ultra-leftists have attacked companies under the guise of patriotism and allegiance to the communist ideals.
Perhaps, China’s leaders have finally recognised that the ultra-leftist revival poses the biggest threat to their plan to boost the economy. The wisdom of Chinese philosopher Hu Shih from more than 100 years ago comes to mind: “More study of problems, less talk of ‘isms’”.
Wang Xiangwei is a former editor-in-chief of the South China Morning Post. He now teaches journalism at Hong Kong Baptist University
