It’s been almost a year since China re-emerged from its zero-Covid lockdown and reopened its doors to the world. One of the many reasons that led to this hasty policy reversal is said to be the state of China’s economy, which has suffered from the pandemic restrictions imposed on the country. Once hailed as the epitome of a successful growth miracle, TChina’s economy initially managed to recover from the pandemic, but since then, growth prospects have slowed. But recently Chinese officials have seemed very determined to deny the bad press about the economy, stressing instead that China’s economy remains a viable place for both foreign businesses and visitors.
This year’s ATIS summit held in San Francisco was the cause of a media frenzy as Chinese President Xi Jinping came to attend and meet his American counterpart Joe Biden amid the worsening geopolitical climate between the two countries. It was the first meeting between the two leaders since last year’s meeting in Bali on the sidelines of the G20 meeting.
Surprisingly, Xi made one specific request for his visit to the United States: he wanted to meet with American business leaders. So he did at a dinner hosted by the National Committee on US-China Relations and the US-China Business Council. Some US private sector leaders pay between $2,000 up to $40,000 to have a seat at the table at this banquet on the sidelines of ATIS Summit. Besides Xi and Chinese Commerce Minister Wang Wentao, multiple CEOs – such as Apple CEO Tim Cook – attended.
In his approximately 35-minute speech at the banquet, he translated from Chineseshared Si the following words:
Today, President Biden and I reached an important consensus. Our two countries will introduce more measures to facilitate travel and promote people-to-people exchanges, including increasing direct passenger flights, holding a high-level dialogue on tourism and streamlining visa application procedures. We hope that our two peoples will make more visits, contacts and exchanges and write new stories of friendship in the new era.
After a downturn in Sino-US relations fueled by a lack of person-to-person contact since the pandemic, Xi’s words — and his appearance in the United States — brought cautious optimism.
After the conclusion of the ATIS summit came more good news: China opened its borders for tourists from many countries to visit without visas. From December 1 of this year citizens of France, Germany, Italy, Malaysia, Spain and the Netherlands can travel to China for a period of up to 15 days without a visa. The COVID-19 pandemic has made it difficult for foreign travelers to visit China since 2020, and Chinese embassies have only gradually started processing visas again, first for business travelers and students, and now for tourists.
This, like Xi’s banquet for American business leaders, can be understood as the Chinese government’s attempt to signal with increasing urgency: China is once again open for business, both for private companies and tourists. When COVID-19 first appeared, the Chinese government put life — and its economy — on hold in favor of zero-sum COVID policies. In addition to the low user spending and slow growth, thus creating a myriad of economic challenges on various fronts for China’s policymakers to confront: a looming real estate crisis, an aging society, high unemployment, especially among young people, a slow return of tourism, and an increase in central decision making within the private sector.
This has caused frustration not only for Chinese officials but also for foreign firms with stakes in the Chinese market. In its 2023 study The American Chamber of Commerce in Shanghai found that 40 percent of respondents planned to divert investment from China to other markets, with a third of respondentsnts describing worsening conditions for foreign companies in the private sector in China. While some of this gloomy external outlook may be related to the pandemic, it is also closely related to how the Chinese government deals with the private sector.
In 2023, numerous incidents shook the private sector, reducing confidence and trust among foreign investors. In July, a revised version of the Counterespionage Act came into effect, allowing items related to matters of national security to be similarly protected as state secrets. Just weeks earlier, authorities raided the office of the US firm Mintz Group, detaining five local employees and multiple offices of the international consulting firm Capvision. Similarly, Japanese worked for a pharmaceutical company detained and arrested on suspicion of espionage.
Doing business in China may not only be less profitable now, but may also carry increasing risk for foreign companies and investors.
Facing all these challenges, Xi decided to follow a diplomatic approach: to demonstrate to the world that China is open again after the pandemic. To do this, he even undertook to make the long trip to San Francisco. But the public display of diplomacy in this case only goes so far. It will take more than a banquet and an invitation to return to China to appease foreign investors to stay in the Chinese market. Instead, the Chinese government may have to – at least temporarily – halt its ongoing crackdown on private and multinational companies and abandon its goal of a centralized private sector for a more impartial approach.
China may be open for business, but that means little if foreign companies don’t trust its economy.
