Foreign direct investment from Germany to China rose about 30% in the first eight months of the year from a year ago, China’s Ministry of Commerce said on Monday.
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BEIJING – European businesses in China are re-evaluating their market plans after this year’s Covid control measures further isolated the country from the rest of the world, said Joerg Wuttke, owner. President of the European Union Chamber of Commerce in China said.
China’s strict Covid policy has restricted international travel and business activities – especially after this year’s two-month course in Shanghai.
The tough measures of the past two years have initially helped China recover faster from the shock of the pandemic than other countries.
But the policy is increasingly at odds with a world that is increasingly loosening Covid restrictions.
As for European businesses, “we talk about completely re-aligning our stance on China over the last six months,” Wuttke told reporters at an annual news conference on China’s stance. China, released on Wednesday.
He said the closures and uncertainty on businesses that have turned China into a “closed” and “clearly different” country could drive companies away.
So far, most of the companies haven’t left — only a few are very small, Wuttke said. But he pointed out that the council cannot survey businesses that decide not to enter China.
I’ve been here for 40 years and I’ve never seen anything like this, where ideological decision making is suddenly more important than economic decision making.
Joerg Wuttke
President, EU Chamber of Commerce in China
Foreign direct investment from the EU into China fell 11.8% in 2020 from a year earlier, the agency reported. More recent figures are not available.
“While there is still ‘a group of well-known multinationals ready to make billions of dollars’, the downward trend in FDI is unlikely to be reversed while European operators are greatly limited in their ability to invest going to and from China to develop potential greenfield projects,” the newspaper said.
China’s economy grew by 2.5% in the first half of the year, well below the official target of around 5.5%. Beijing pointed out at the end of July country may not be able to achieve that goal.
Meanwhile, authorities show little sign of scrapping the so-called dynamic zero-Covid policy.
China has reduced the quarantine period for international and domestic travelers. But sporadic lockdowns, even Hainan tourist island or city Chengdu, has kept business uncertainty high.
Wuttke said he hopes China can open its borders as early as the end of 2023, based on the time it takes to vaccinate its people.
‘Systemic consciousness dominates the economy’
European businesses staying in China increasingly face an environment in which “ideology dominates the economy”, the institute’s position report said in its executive summary.
“I’ve been here for 40 years and never seen anything like this, where ideological decision making is suddenly more important than economic decision making,” says Wuttke. “And maybe that’s also amplified by voices from outside, America[n] sanctions, the US cuts off China, so I can partly understand why self-reliance is on the agenda.”
He was referring to China’s push over the past few years to build its own technology and other industries.
Meanwhile, among other measures, the US has restricted its companies from supplying key components to Chinese tech companies like Huawei.
The council did not specify what this ideology consists of, but said China’s Covid policy embodies the country’s “away from the rest of the world”.
Wuttke said the policy remained unchanged despite long and frank conversations with Chinese government officials.
“I think these people, they are torn between what they see must be done, can do,” he said. “Afterward [there’s] a very strict directive, very clear from above, this is how it should be, that is ideology. And how can you challenge the ideology? “
Chinese President Xi Jinping earlier this month said the country had “continued to respond to Covid-19 and promote economic and social development in a coordinated manner”, in his own words. Comments from the Ministry of Foreign Affairs of China.
While Mr. Xi said “China has entered a new stage of development”, he maintained that “China’s door of friendly and open cooperation will always be open to the world”, according to the statement. His remarks came during his first trip abroad since the pandemic began – to Kazakhstan and Uzbekistan – during which he met with the leaders of several countries in the region.
Over the past few years, the Chinese leader has sought to rally the country around the ruling Communist Party and his plans for “the great rejuvenation of the Chinese nation.” Mr. Xi will consolidate his power at a major political meeting next month.
China’s big market
Foreign businesses already present in China are generally still operating until now.
Even if China’s economy grows more slowly, its size and low base “really make a compelling case.” [for foreign businesses]we’ll still make it,” Wuttke said.
Some, especially the German auto giants, are investing more.
During the first eight months of the year, Foreign direct investment from Germany increased by about 30% from a year earlier – faster than the 23.5% rate recorded in the first seven months, China’s Ministry of Commerce said on Monday.
However, the Department has not released updated data on investment from the United States, which official data shows has growth of about 36% in the first seven months of the year.
Foreign businesses can still find specific areas of opportunity.
China is improving its access to local markets, Wuttke said, although in areas where locals already dominate or are “desperate” for foreign investment. “Otherwise, to be honest, I would stop making this paper.”
