China’s campaign to win investment wavers as overseas capital plays waiting game

Overseas enterprises and investors have not rushed back into China, with foreign direct investment figures not yet showing a renewal of confidence

Geopolitical shifts and an uncertain environment have prevented a return to the status quo, with many adopting ‘new working models’ to limit their exposure

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Foreign businesses operating in China have not returned to the high levels of investment which have characterised earlier years of engagement. Photo: AP

Published: 11:00pm, 22 Apr 2024Updated: 11:45pm, 22 Apr 2024

The “new working models” of international enterprises in China and Beijing’s heavy focus on self-reliance have deterred a resurgence of foreign direct investment (FDI), business leaders said, as inflows fell more than a quarter from the previous year.

FDI movement into China from January to March was 301 billion yuan (US$41.6 billion), down 26 per cent from last year according to official numbers released last Friday.

While Beijing hailed a reported gross domestic product growth of 5.3 per cent over the same period as an indication its economy is in stable recovery, notable figures in the field said firms are staying cautious for several reasons.

Ker Gibbs, former president of the American Chamber of Commerce in Shanghai, said American companies now operate in China based on a “new working model” – one where the localisation of their Chinese operations continues, but has became more pronounced after foreign staff members have left the country en masse amid changing policies and a degenerating bilateral relationship.

It’s a drag on business, but it’s not gonna shut anything down

Ker Gibbs

“Companies are separating their China operations so they function in more of a silo. Nobody is happy about this, but it’s the reality of the new working model,” said Gibbs, who is now an executive-in-residence at the University of San Francisco’s China Business Studies Initiative.