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‘Fully Confident’? Beijing Exaggerates Foreign Confidence in the Chinese Market

People walk at the entrance of the Shanghai Free Trade Zone in Pudong district, in Shanghai September 14, 2014. (Carlos Barria/Reuters)
People walk at the entrance of the Shanghai Free Trade Zone in Pudong district, in Shanghai September 14, 2014. (Carlos Barria/Reuters)
Wang Wenbin

Wang Wenbin

Chinese Foreign Ministry spokesman

“[T]he vast majority of foreign businesses remain fully confident in the Chinese market.”


On August 12, Chinese Foreign Ministry spokesman Wang Wenbin painted a rosy picture of foreign investments in China, citing a survey on the business environment for foreign companies.

Issued by the China Council for the Promotion of International Trade (CCPIT) in May, the survey concluded that “more than 90% foreign companies overall rated China's business environment good.”

Expanding on the survey’s results, Wang cited numbers from China’s Ministry of Commerce and the United Nations Conference on Trade and Development (UNCTDA) to show a year-over-year increase in foreign investment. He also said that surveys by foreign chambers of commerce and foreign media reports showed that China had become “a promising land for investment in recent years.”

“All this shows that the vast majority of foreign businesses remain fully confident in the Chinese market,” he claimed, adding that “measures being put in place to ensure safety against COVID and promote socio-economic development” would further boost the Chinese market’s prospects.

That is misleading.

While it is true that foreign investment into China in 2022 has increased year over year, and that a majority of foreign businesses have not exited China, foreign companies are far from “optimistic” or “fully confident” about doing business there.

China’s draconian policy of zero-COVID lockdowns, staunchly championed by the country’s president, Xi Jinping, is among the main causes of concern within the foreign business community.

A flash survey conducted by the American Chamber of Commerce (AmCham) in China over April 29-May 5 found that the American business community’s “confidence in doing business in China continues to decrease.”

More than half (52%) of the survey’s respondents indicated they had “already either delayed or decreased investments as a result of the recent COVID-19 outbreak,” while 58% indicated they had decreased their 2022 revenue projections.

While much of the world has moved beyond the COVID-19 pandemic and eased restrictions on businesses and daily lives, China has maintained a stringent zero-COVID policy that has restricted the number of flights into the country and imposed sweeping lockdowns in major financial and economic hubs, shuttering factories and businesses.

“The COVID lockdowns this year and the restrictions over the past two years are going to mean that three, four, five years from now, we will most likely see investment decline,” AmCham China President Michael Hart said during a May press conference in Beijing to launch the chamber's annual report.

Hart also said COVID restrictions were “leading foreign companies with supply chains in China to look for alternative sources to reduce disruption,” Reuters reported.

“While this doesn’t mean an immediate shift outside of China, Hart said that many firms that source from China are asking where else they can get supplies, and whether they should be building or sourcing from somewhere else,” Bloomberg News reported.

The AmCham survey found that China’s zero-COVID policies had led 49% of the respondents to say that “foreign talent is either significantly less likely or refusing to relocate to China.”

“China usually ranks among the top three destinations for investment among AmCham’s member companies, but ‘it is falling in preference,’ Bloomberg News quoted Hart as saying. He added that if people can’t travel to the country, it will “decline as an investment destination.”

According to AmCham China’s 2022 annual report, “with respect to the two-year business outlook, there was an 11-point decline in optimism related to domestic market growth and an 18-point decline related to economic growth and recovery.”

“The increasing lack of optimism in market growth and economic recovery may be related to China’s slowing economic growth rate, which has been adversely impacted by pandemic-related restrictions across the country,” the report says. “While China is still viewed as a profitable and valuable market, the increasing overall market uncertainties make companies wary of predicting large gains in China over the short-to-medium term.”

European companies in China share similar concerns.

Bloomberg News reported in May that many European companies in China “are putting investment plans on pause and starting to consider whether to leave the country,” and that “[u]ncertainties about a potential next wave of outbreaks are taking a heavy toll on business confidence.”

Bloomberg News quoted Massimo Bagnasco, vice president of the European Chamber of Commerce in China, as saying: “Uncertainty is really the keyword, because there’s no view, no outlook about how long this could last, and what will be next after Shanghai.”

Shanghai, China’s largest city and a financial hub, was at the epicenter of the country’s worst COVID-19 outbreak last March after the virus emerged in Wuhan in late 2019. The city of 26 million people was under a strict months-long lockdown, with residents confined to their homes and businesses abruptly put on hold.

The EU Chamber’s 2022 Business Confidence Survey, a flash survey conducted April 21-27 and issued in June, found that “while most [two-thirds] European companies in China posted positive revenues and were profitable in 2021, doing business became more difficult for the majority (60%).”

“As the rest of the world returns to a pre-pandemic level of normality, and China’s stringent COVID-19 policy exacerbates the challenges of doing business, many European Chamber members are questioning just how many eggs they are willing to keep in their China basket,” the Chamber said in a press release accompanying the survey.

The flash survey showed that 23% of respondents were “considering shifting current or planned investments out of China as a result of its more stringent COVID-19 restrictions … the highest proportion in a decade.” And 77% of respondents reported that “the measures have decreased China’s attractiveness as a future investment destination.” Sixty percent of the respondents lowered their revenue projections for 2022, the survey said.

“The only thing predictable about China today is its unpredictability, and that is poisonous for the business environment,” said Bettina Schoen-Behanzin, vice president of the EU Chamber in China, in a press release about the 2022 survey. “Increasing numbers of European businesses are putting China investments on hold and re-evaluating their positions in the market as they wait to see how long this uncertainty will continue, and many are looking toward other destinations for future projects.”

According to a flash survey conducted May 6-8 by the German Chamber of Commerce in China, nearly 30% of those surveyed said they had plans to leave China due to its COVID policies.

The Japan Times newspaper reported in June that Japanese companies “have become more reluctant to expand their investment in China,” blaming China’s zero-COVID policy.

In June, Tokyo Shoko Research, a corporate research agency, conducted an online survey that received responses from 5,799 large and small Japanese enterprises.

According to The Japan Times, Tokyo Shoko Research found that Japanese companies are “‘likely to be compelled to review’ their business plans and strategies for operating in China in the face of the ‘vulnerability’ of the country's supply chains and logistics.”

Japan’s Nikkei Asia newspaper, citing a survey by the Shanghai Japanese Commerce and Industry Club, reported that 14% of the Japanese companies operating in Shanghai “plan to ‘reduce’ or ‘postpone’ future investments in China.” Thirty-nine percent said they “did not know yet.”