Ian Williams Ian Williams

Xi’s iron fist is hurting China’s economy

The country wants foreign investment while attacking foreign companies

Xi Jinping and his wife, Peng Liyuan (photo: Getty)

Mao Zedong had a big thing about contradictions. They were the basis of life, driving it forward, the old despot once mused. But even he might have struggled to understand today’s Communist party – which is desperately trying to drum up foreign investment while simultaneously hounding foreign companies out of the country.

The latest figures on inward investment will have made grim reading for the elderly leaders in Zhongnanhai, their compound in Beijing. Foreign investment fell to $20 billion in the first quarter of 2023, compared with $100 billion over the same time last year, according to the research firm Rhodium Group. This comes as the economic recovery following China’s reopening after Covid-19 is rapidly running out of steam. June exports fell 12.4 per cent year on year, youth unemployment at more than 20 per cent is at its highest level since China began publishing data in 2018, and analysts are scrambling to cut their growth forecasts.

There are whispers that the country is becoming uninvestable

Beijing has labelled this year the ‘Year of Investing in China’. Regional leaders have sent delegations around the world to drum up interest, with little to show for it. At a World Economic Forum event in the Chinese port city of Tianjin last month, China’s premier Li Qiang told a round table of business leaders, ‘I want to take this opportunity to affirm China’s commitment to opening up.’ While this week, Xi Jinping himself was quoted by state television as calling for greater foreign cooperation in trade, investment and financial innovation.

It all smacked a bit of desperation after months of Xi trying to bring foreign companies to heel. This including questioning staff at consulting firm Bain and Co and raiding and detaining staff at the Beijing office of the due diligence company Mintz Group. Both of these companies deal in information, making the sort of insights into the market and about would-be partners that are essential in the opaque world of Chinese business.

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