Visitors walk on the Bund in Shanghai, China, on Friday, February 12, 2021.
Qilai Shen | Bloomberg | Getty Images
BEIJING — Foreign companies are trying to hold on to lucrative opportunities in China, even if new regulations and the pandemic have made international operations harder.
As these businesses watch a crackdown on domestic tech giants, the Chinese government has continued to promote the world’s second-largest economy as opening further to overseas capital.
In just the last few weeks, local authorities in the cities of Beijing and Shenzhen have followed those in Hainan — an entire island province that is becoming a free trade zone — in announcing new benefits for foreign capital in special development districts. Similar business-friendly policies have been rolled out in the past, with mixed results.
“The main difference is it’s much more targeted than it was before,” said Adam Dunnett, secretary general at the EU Chamber of Commerce in China.
“Now you’ve really got to show you’ve got something that China wants, or China doesn’t feel is a competitor to its own interest and needs,” he said.
Chinese authorities kicked off their latest five-year development plan this year. It contains ambitious goals for technological advancement in the face of rising pressure from the U.S. Beijing also wants to build up the economy’s reliance on domestic consumption, rather than exports.
“The way we see it is, some companies are going to get pushed out of the market,” Dunnett said. “They’ll fight as long as they can. Others have something to offer, and they’re willing to offer it because the market is there and it’s good and they’ll try to hold onto it as long as they can. And others, quite frankly, are in areas that are not deemed as being sensitive and will continue to do well in their own right with relatively little disturbance.”
When it comes to the overall operating environment, leaders of American and European business interest groups in China said members haven’t seen significant progress on Trump-era calls for more equal access in the country. A paper released Thursday by the EU Chamber of Commerce in China noted in particular that government procurement policies still favor local businesses over foreign ones.
Beijing’s regulatory crackdown is not helping sentiment. In July, Chinese authorities ordered ride-hailing app Didi to suspend new user registrations just days after its New York IPO, and told after-school tutoring companies to slash operating hours. Companies from Tal Education to Tencent have seen shares plunge.
“Of late, we’ve seen some crackdowns on entire sectors and in ways that aren’t entirely understandable or predictable,” said Greg Gilligan, chairman of the American Chamber of Commerce in Beijing. “Businesses need, of course, stability and predictability.”
The other pressing challenge for businesses is getting visas approved for executives, their spouses and children, Gilligan said. “These restrictive travel policies are directly impacting foreign investment decisions in a negative way.”
China’s national economic planning agency acknowledged this specific drag on investment at a press conference this month on encouraging foreign direct investment. There was no mention of support for employee relocation, but rather general statements on relaxing restrictions on foreign capital.