Foreign CEOs Attend China’s Investment Summit Amid Concerns About Economic Risks
BEIJING — China’s government rolled out the red carpet for foreign executives in an effort to boost corporate investment in a market that was once considered a global growth engine.
However, many executives expressed caution as they left China, stating that while the situation may not be worsening, the risks of expanding in China still outweigh the rewards.
During a series of high-profile events, Chinese officials assured foreign firms of equal treatment, expressed confidence in achieving a 5-percent growth target this year, and President Xi Jinping met with 15 U.S. business leaders to counter the idea of “peak China” being just speculation.
Foreign direct investment only makes up 3 percent of total investment in China and has been decreasing for the past two years. This decline has been viewed as a lack of confidence in the second-largest economy in the world and a way to enhance the competitiveness of Chinese companies.
Data from China’s commerce ministry revealed an 8 percent decrease in foreign direct investment last year. A broader measure from the currency exchange regulator, including retained earnings, showed a steep 80 percent decline in 2023 to $33 billion, the largest drop since records began in 1980.
Various factors have contributed to the decline in China’s attractiveness, such as doubts about the sustainability of the economic recovery, increased regulations, Beijing’s efforts to establish national champions in key industries, and the strained relations with the United States.
Executives also pointed out that Chinese companies with government ties have been able to avoid the profit-and-loss discipline that foreign investors face, leading to overcapacity issues in industries like vehicle production.
While the Chinese government has announced 48 measures since August to restore foreign investor confidence, many of these have not been implemented yet, leaving European companies feeling disadvantaged when it comes to market access and other business aspects.
Despite these challenges, the presence of numerous multinational companies in China this week highlights the market’s strong pull. However, concerns about data regulations and competition remain top issues for many foreign investors.
Overall, while the meetings provided a platform for companies to air their grievances, the official engagements and strategic decisions on whom to meet have raised questions about China’s approach to engaging with international investors. Nonetheless, the efforts from Beijing to signal change have been noted by companies already invested in China.
