President Xi Jinping says the government should create a “stable, fair, transparent and predictable” environment for foreign businesses operating in China, stepping up Beijing’s rhetoric to woo foreign business as the country is gradually losing its attractiveness to overseas investors. In rare praise for the role of overseas businesses, Xi said foreign money has “helped reasonable resource relocation, promoted market-oriented reforms and played an important role for China’s economic development”, the state-run news agency Xinhua reported. As such, China must do more to retain and attract foreign investment, he said. Xi made the comments at the latest gathering of the central leading group on finance and economic affairs, according to Xinhua. It was the first time the Communist Party’s main economic policy decisionmaking body has specifically discussed China’s strategy in attracting foreign investment since Xi came to power five years ago.
China, once the darling of global investors, is fading from favor due to its rising costs and excessive red tape. Foreign firms operating on the mainland have complained about restricted access to Chinese markets and regulations they say favor domestic companies. The pressure is also on Beijing to attract and even to retain foreign businesses as competition for investment is increasing from overseas. Mats Harborn, the president of the European Union Chamber of Commerce in China, said at a media briefing last week that Beijing’s rhetoric about opening up its markets was “not matched by concrete implementations”.
One in five US businesses in Shanghai are redirecting investments planned for China to other destinations, according to a survey by the American Chamber of Commerce in the city published last week. Xi said China must grant “national treatment” to foreign businesses, improve intellectual property rights protection and gradually open up its domestic financial sector to foreign investors. However, it remains to be seen how serious China is on acting on its promises. In one example, China promised to open its market to foreign banks when it entered the World Trade Organisation in 2001, but the combined market share of overseas lenders is still only about two percent.