Analysts say that China’s efforts to charm investors at the Davos conference have not been successful.
A considerable group from China attended the 2020 World Economic Forum in Davos with the goal of promoting their country as a viable and secure investment destination. However, experts note that Premier Li Qiang’s address on Tuesday lacked concrete details that could have instilled confidence in potential investors.
Li headed a group of 140 individuals to the five-day gathering of prominent political and business figures this week. According to the U.S. news website Politico, China brought along 10 officials at the ministerial level who are involved in the country’s economic matters. Li is the most senior Chinese leader to participate in the yearly event since 2017, demonstrating the significance Beijing places on it.
Anna Ashton, the director of China corporate affairs and U.S.-China at Eurasia Group, a consulting firm that specializes in global political risk, stated in an email to VOA that China’s emphasis on the meeting highlights two things: 1) Beijing’s ongoing interest in influencing global economic relations and development initiatives, and 2) the significance Beijing attaches to revitalizing its international trade and investment partnerships.
During his speech, Li reassured both investors and politicians that China’s economy still holds significant potential and continues to be a vital contributor to global growth, despite facing significant economic challenges in the past year.
Signs of trouble
After the pandemic, China’s economy has faced challenges in its recovery, including a decline in the property market, a high rate of youth unemployment, and a decrease in exports for the first time since 2016.
In the third quarter of 2019, China experienced a negative balance of foreign direct investment, totaling $11.8 billion. This marks the first time since 1998, when records began, that China has recorded a quarterly deficit in foreign investment. According to Bloomberg, this means that there were $11.8 billion more divestments and downsizing of businesses than there were new investments.
In 2023, China’s official economic growth was 5.2%, which met its goal of approximately 5%, but fell short of analysts’ predictions and was one of the slowest growth rates in many years.
Despite facing difficulties, Li stated on Tuesday that the overall direction of the economy remains positive and China will persist in playing a role in global economic growth. He also reassured that China will uphold its principle of further opening up to the international community.
According to VOA, Gary Hufbauer, a senior member of the Peterson Institute for International Economics, stated that Li’s speech was overall optimistic and indicated his desire to dispel any negative perceptions of China’s economy from external sources.
However, he mentioned that Li’s speech lacked concrete actions that Beijing would implement to entice Western companies. This did not alleviate their worries about the direction of China’s economy.
“I believe that the corporate sector, particularly companies with significant presence in China, would adopt a skeptical attitude towards the situation, as they are well-versed in the numerous regulations and limitations that hinder their business operations, as well as the risk of their intellectual property being taken. This makes the environment less conducive for business,” he stated.
This speech lacked definitive actions that would truly attract the business community, making them more doubtful.
Reasons for concern
According to certain trade organizations, there has been a move away from investing in the Chinese economy due to stricter political regulations, such as crackdowns on businesses and restrictions on foreign executives leaving the country.
According to a recent study conducted by the Conference Board, an American nonprofit organization focused on business and research, the CEOs of multinational corporations with establishments in China are rapidly losing faith in the country.
The confidence index of the survey decreased from a previously high score of 72 in April to 54 on a scale of 0-100. 40% of CEOs who participated in the survey predicted a decrease in capital investments in China, while a similar percentage anticipated employee layoffs in the next six months. This is in contrast to only 9% who expected layoffs in the first half of last year.
The Chamber of Commerce in China, representing Japan, released data on Monday indicating that nearly half of the companies surveyed either did not invest or decreased their investment in China in 2023 compared to the previous year.
Reuters reported that during a luncheon following his speech on Tuesday, Li stated, “We are committed to taking proactive measures to address the valid concerns of the international business community.”
As Li announced that China’s door would expand, President Xi Jinping conveyed a contrasting message that highlighted the importance of the Chinese Communist Party.
During a speech on January 16, Xi emphasized the importance of China pursuing economic growth through its own unique methods, rather than following Western financial models. This approach involves maintaining the Communist Party’s control and direction over economic matters.
According to Ashton from Eurasia Group, businesses rely on stability in order to be successful.
“The significance of Li’s words will be best assessed in the follow-through,” she said. “China’s own actions have and will continue to factor into the turbulent geopolitical atmosphere that Li described. Divergent priorities, interests and convictions cannot just be wished away, and cooperating effectively to address them is easier said than done.”
Shortly before its yearly conference in Davos, Switzerland, the World Economic Forum published a poll of economists indicating that they do not predict anything beyond modest growth in China’s economy for this year.