How China can reassure nervous foreign investors before it’s too late
- While
US security moves only target and affect Chinese investments and trade,
China’s responses are rattling investors around the world
- For
a start, Beijing must tamp down its high-profile anti-espionage
campaign and review its exit ban – which investors find chilling
China’s President Xi Jinping and his US counterpart Joe Biden
look set to meet in San Francisco later this month. They will no doubt focus on the
Taiwan
issue, the most significant challenge to a stable US-China
relationship, but how to manage the “securitisation” of the bilateral
economic relationship should also be a priority.
Beijing
has accused Washington of playing up concerns about the security
implications of their economic ties since 2018, when the Trump
administration launched the trade war. Biden’s administration has
escalated it into a
chip war aimed at stifling China’s progress in cutting-edge technologies.
To
Beijing, Washington appears to “securitise” almost every aspect of
economic ties, from trade and technology to investment, in the name of
national security. TikTok, a short-video sharing platform, is under
closer scrutiny because of its
Chinese ownership, and security concerns have even been raised about Chinese-made electric buses running in US cities.
Painting
itself as the wronged party, Beijing maintains the US is solely to
blame for everything that has gone wrong in the relationship.
But Beijing’s claim is disingenuous, to say the least.
Beijing
is also busy “securitising” US-related trade and investment issues in
response to Washington’s moves. This is in line with Beijing’s
considerable shift towards security, away from development. The latest
examples include sudden and little-explained
raids and
arrests concerning Taiwanese Apple supplier Foxconn and some American consultancies and other companies.
lags
a seen in front of the Capvision Partners headquarters in Shanghai on
May 10. In May, Chinese authorities questioned and raided Capvision’s
offices in Beijing, Shanghai, Shenzhen and Suzhou, accusing the
consultancy of passing on sensitive information abroad. Last month,
Capvision said it had passed China’s security assessment. Photo: EPA-EFE
Such actions contradict its
stated goal of opening up wider to foreign investment and trade, and frighten away investors from the US and elsewhere.
In other words, while US moves only target and affect Chinese investments and trade, China’s responses are
rattling investors
around the world. It is high time for the Chinese government to review
its polices; it acutely needs investment to revive an economy hit hard
by three years of zero-Covid controls.
The
key is to find a better balance between security and development to
reassure investors at home and abroad – a key issue expected to be
addressed at an important party plenum due to be held in the next few
months.
Foreign investors’ sentiment towards China has soured. More are complaining privately, and bitterly, that China has become “
uninvestable” – an ominous view unthinkable even five years ago.
In August, US Secretary of Commerce Gina Raimondo referred to this view during a visit to China,
pointing to fines, raids and other actions against companies that have made it too risky to do business in China.
03:03
US-China relations depend on strong economic ties, says US commerce chief during talks in Beijing
US-China relations depend on strong economic ties, says US commerce chief during talks in Beijing
China,
which has rejected the allegation, should take the complaint seriously.
Some officials still hold the outdated belief that China’s market is
too big to miss. They must realise that foreign investor sentiment is on
the edge of a precipice. Sweet-talking and a red-carpet welcome are no
longer enough.
Over
the past few months, some Hong-Kong-based fund managers have told me
they find it increasingly difficult to persuade their headquarters or
institutional investors to approve new investments in China, as opposed
to India.
“We
believe in China’s growth story and we want to invest but it is getting
really hard,” one manager of a mega fund lamented, later saying he had
decided to close his office in Hong Kong. He is not alone. Leading
American funds including
Vanguard and
Sequoia plan to either shut down their business in China or split off China-related operations.
As
Beijing seeks to stabilise ties with the US and other Western
countries, it should waste no time in taking substantive steps to
reassure investors – before they leave for good.
For a start, Beijing must tamp down its
“catch a spy” campaign,
launched after its revised anti-espionage law in July. The law
broadened the scope beyond leaks of state secrets and intelligence to
include any “documents, data, materials or items related to national
security and interests”.
A
nationwide campaign has featured red banners on the streets and posters
with a hotline to report any suspicious individual or activity. These
are vivid reminders of the Mao years when people were encouraged to
report on each other, even spouses and relatives, on any perceived
deviation from the party line.
The
Ministry of State Security, the usually secretive spy agency, has
started to issue public comments on diplomatic, financial and economic
issues, warning about sabotage by the so-called foreign actors.
01:51
China confirms Japanese national arrested in Beijing on suspicion of spying
China confirms Japanese national arrested in Beijing on suspicion of spying
Westerners working in China and Chinese nationals working for foreign companies or organisations
feel the chill.
This
comes as ultranationalists dominate China’s social media and try to
paint all Western countries as harbouring malicious intent while
blasting their complaints or criticism – many valid – as baseless or
having ulterior motives.
While every country has its anti-espionage laws, China’s
high-profile campaign is causing unnecessary panic and worry.
Meanwhile, China’s “
lying flat”
malaise seems to have spread to its already inefficient bureaucracy.
Officials, repeatedly ordered to listen to the party leadership, often
sit on problems unless orders are given.
The
latest example is the feet-dragging over the cancellation of the health
declaration requirement for travellers entering or leaving the Chinese
mainland. It was finally
cancelled at the beginning of this month, nearly 11 months after Beijing lifted stringent border controls.
Officials
had ignored the mounting calls for cancellation until the order came
down from the highest level. For many travellers, the procrastination
left a bad taste in the mouth.
As
repeatedly argued in this space, China must also review its policy of
exit bans,
which prevent overseas businessmen from leaving because of a business
dispute or connections with individuals under investigation.
The
policy is opaque and arbitrarily enforced, and hurts Beijing’s efforts
to welcome foreign investment, simply because any overseas traveller
could be stranded in China indefinitely.
Foreign
investors are exiting China in a trickle, but it will soon become a
river unless Beijing takes immediate and substantive steps to reassure
them.
Wang Xiangwei is a former editor-in-chief of the South China Morning Post. He now teaches journalism at Baptist University