Almost a year has passed since China has re-emerged out of its zero-COVID isolation and reopened its doors to the world. One of the many reasons leading to this hasty turnaround in policy was rumored to be the state of the Chinese economy, which had suffered from the pandemic restrictions imposed upon the country. Once hailed as the epitome of a successful growth miracle, the Chinese economy at first managed to bounce back from the pandemic, but since then has seen slowing growth prospects. But, recently, Chinese officials have seemed very intent on negating bad press about its economy, instead emphasizing that the Chinese economy remains a viable place to come for foreign businesses and visitors alike.
This year’s APEC summit, held in San Francisco, was the cause of media furor, as Chinese President Xi Jinping came to participate and meet with his American counterpart, Joe Biden, amid a worsening geopolitical climate between the two countries. It was the first meeting between the two leaders since last year’s meeting in Bali on the sidelines of the G-20 summit.
Surprisingly, Xi made one specific demand for his visit to the United States: He wanted to meet with American business leaders. And so he did, at a dinner event hosted by the National Committee on U.S.-China Relations and the U.S.-China Business Council. Some leaders of the American private sector paid between $2,000 to as much as $40,000 to have a seat at the table of this banquet at the sidelines of the APEC summit. Besides Xi and Chinese Minister of Commerce Wang Wentao, multiple CEOs – such as Apple CEO Tim Cook – attended.
In his roughly 35-minute speech at the banquet translated from Chinese, Xi shared the following words:
Today, President Biden and I reached important consensus. Our two countries will roll out more measures to facilitate travels and promote people-to-people exchanges, including increasing direct passenger flights, holding a high-level dialogue on tourism, and streamlining visa application procedures. We hope that our two peoples will make more visits, contacts and exchanges and write new stories of friendship in the new era.
Following a low in China-U.S. relations, fueled by a lack of person-to-person contact since the pandemic, Xi’s words – and his appearance in the United States – brought along cautious optimism.
After the conclusion of the APEC summit, further good news came: China opened its borders to tourists from multiple countries to visit visa-free. Starting from December 1 this year, citizens of France, Germany, Italy, Malaysia, Spain, and the Netherlands can travel to China for up to 15 days without a visa. The COVID-19 pandemic had made it difficult for foreign travelers to visit China since 2020, and Chinese embassies were only gradually starting to process visas again first for business travelers and students, and by now, tourists too.
This, as well as Xi’s banquet for American business leaders, can be understood as the Chinese government’s attempt with growing urgency to signal: China is back open for business, both for private companies and tourists. When COVID-19 first emerged, the Chinese government put life – and its economy – on pause in favor of zero-COVID policies. In addition to low consumer spending and slow growth, thus emerged a myriad of economic challenges on multiple fronts for Chinese policymakers to confront: a looming real estate crisis, aging society, high unemployment especially among the youth, slow return of tourism, and increasing central decision-making within the private sector.
This caused frustration not only for Chinese officials, but also for foreign businesses with stakes in the Chinese market. In its 2023 survey, the American Chamber of Commerce in Shanghai found that 40 percent of its respondents were planning to redirect investments from China to other markets, with one-third of respondents describing worsening conditions for foreign companies in the private sector in China. While some of this gloomy foreign outlook may be related to the pandemic, it is also closely interrelated with the Chinese government’s handling of the private sector.
In 2023, multiple incidents rocked the private sector, diminishing confidence and trust among foreign investors. In July, an overhauled version of the counter-espionage law entered into force, allowing items related to national security matters to be similarly protected as state secrets. Just weeks earlier, authorities raided the office of U.S. firm Mintz Group, detaining five local staff, and multiple office locations of international advisory firm Capvision. Similarly, a Japanese man working for a pharmaceutical company was detained and arrested, on suspicions of espionage.
Doing business in China may not only be less lucrative now, but also may carry an increasing perceived risk for foreign companies and investors.
Confronting all these challenges, Xi decided to pursue a diplomatic approach: to demonstrate to the world that China is back open after the pandemic. To do so, he even took it upon himself to make the long trip to San Francisco. But a public show of diplomacy in this case only goes so far. To reassure foreign investors to remain in the Chinese market will take more than a banquet and an invitation to return to China. Instead, the Chinese government may need to – at least temporarily – halt its continued crackdown in private and multinational companies and forgo its goal of a centralized private sector for a more laissez-faire approach.
China may be open for business, but that means little if foreign companies lack confidence in its economy.