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China’s leadership reshuffle under President Xi Jinping (pictured on screen) last month raised questions about the country’s economic policy moving forward. Photo: AP

US firms told ‘China is still open for business’ in charm offensive following party congress

  • Round-table discussion with more than 60 American companies gives National Development and Reform Commission a chance to tout China’s opening up
  • But uncertainties over China’s future economic policies, its zero-Covid strategy, and rising tensions with the US continue to suppress foreign confidence in Chinese market
Amid rising tensions between the world’s two largest economies, China’s top economic planner held a round-table discussion with more than 60 American companies in a bid to woo foreign investors and restore confidence in the Chinese market following the 20th party congress.

On Tuesday, the National Development and Reform Commission (NDRC) discussed how American companies could better tap into new business opportunities amid China’s vows to further open up and encourage foreign investment.

China’s leadership is determined to expand high-level opening-up while maintaining mutually beneficial cooperation with US companies, said Gao Jian, a deputy director at the NDRC and speaker at the meeting, according to China News Service.

Beijing also expects US companies to “deepen their understanding of China’s latest policies” and “actively integrate into China’s new development plan to ensure the security and stability of the global industrial chain and supply chain”, Gao said.

China’s pledge to support foreign investors isn’t very convincing, survey finds

The meeting took place less than two weeks after the 20th party congress, when the twice-a-decade leadership shake-up, under President Xi Jinping, raised concerns among foreign investors and stoked uncertainties over future economic policies.

“The story continues to be about [China’s] uncertain business environment caused by zero-Covid policies, the troubled bilateral relationship [with the US] and, to a lesser extent, rising operational costs and weak domestic demand,” said Doug Barry, communications vice-president at the US-China Business Council (USCBC).

American business representatives at Tuesday’s meeting were from US multinational companies, including Amazon, Apple, General Motors and Micron Technology, plus others from high-end manufacturing, pharmaceuticals, finance, energy, automotive and entertainment firms.

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China-US trade has remained robust despite geopolitical entanglements, with total bilateral trade up by 7 per cent to US$580 billion in the first nine months of 2022, year on year, while American investments in China grew 1.3 per cent to US$1.9 billion over that stretch, according to Chinese customs.

Any shift in Covid policy to reduce lockdown unpredictability could immediately boost investment sentiment significantly
Lin Han Shen, The Asia Group

“The NDRC wants to convey that China is still open for business,” said Lin Han Shen, senior adviser for The Asia Group, a Washington-based consultancy for business interests in the trans-Pacific region.

“With its pro-growth policies, market size and liquidity, China will continue to be critical to any multinational’s Asia-Pacific strategy. Despite recent news of offshoring production from China, in practice it’s a challenge to find a substitute for the rapid resource mobilisation and scalability that China offers.

“Despite awareness of China’s ideological shift, companies still weigh short-term metrics such as margins, which – while tightening – continue to be positive. Any shift in Covid policy to reduce lockdown unpredictability could immediately boost investment sentiment significantly.”

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Beijing’s charm offensive comes at a time when many American firms are setting their budgets for the coming year.

‘Opening up is China’s basic state policy’ but scrutiny to stay

Just last week, the NDRC expanded the list of sectors open to foreign investment to 519, up from 480, as part of its pledge to encourage foreign capital to flow into the Chinese market – especially the manufacturing sectors, as Beijing continues to prioritise industrial and supply-chain security.
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However, China’s ongoing zero-Covid policies; economic and regulatory challenges; and volatile travel restrictions have upended the operations of US businesses in China, plunging their sales forecasts to a 10-year low, according to survey findings published last week by the American Chamber of Commerce in Shanghai.

The chamber said that only 55 per cent of more than 300 surveyed companies said they were at least slightly optimistic about the five-year business outlook, and that one in three respondents said their investments planned for China had been redirected elsewhere in the past year.

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The lingering possibility that companies could again be forced to abruptly halt operations due to coronavirus-imposed lockdowns and local controls remains the top challenge facing businesses in China, according to the USCBC. It added that business sentiment will be closely tied to decisions by US and Chinese policymakers in the coming months and years.

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“Geopolitical pressures are [also] bleeding into the commercial realm … Chinese customers’ real and perceived concerns about ongoing access to US technology due to US-China tensions continue to threaten US companies’ competitiveness in the market – an alarming trend that could be difficult to reverse,” the USCBC said in a report published in August.

“At the same time, companies overwhelmingly remain profitable in China, and they continue to recognise China’s importance to their global competitiveness.”

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