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Policy “inconsistency” in China is discouraging foreign investors despite Beijing’s efforts to reassure international businesses, a major US economic lobby group has said.
Chinese President Xi Jinping sought to boost foreign investor confidence last month, telling visiting U.S. leaders that his country’s growth prospects remained “bright.”
But an annual report released Tuesday by the American Chamber of Commerce in China highlighted concerns about a lack of regulatory clarity and consistency in policy and its implementation, which it said had led to a “cautious approach” to the part of investors.
“There is an inconsistency,” Michael Hart, president of AmCham China, said at a news conference. “What is said in one month will not necessarily be put into practice in the months to come.”
AmCham China’s 600-page report cites examples where clarity is lacking, such as “ambiguous policy guidance and directives” regarding the import and export of seeds, inconsistent testing standards in the cosmetics industry and an unclear crypto law introduced in 2019.
He also highlighted what he described as increasing pressure on foreign companies, including “strict data control policies”, “raids on consultancy firms”, “shutdown of databases” and ” concerns about ambiguity in new national security, data security and counterattack measures.” -the laws and regulations on espionage”.
These problems “led to a perception of increased risk,” the report said.
China’s balance of payments data suggests that foreign direct investment fell last year to its lowest level since the 1990s. Commerce Ministry data released last week showed that FDI into China fell by 26% year-on-year in the first quarter of 2024, reaching RMB 302 billion ($42 billion).
Beijing has focused heavily on national security since the coronavirus pandemic, introducing a revised anti-espionage law last year and tightening control of domestic information and data after easing years-old restrictions under which the borders were effectively closed.
Hart said one of the chamber members’ “major concerns” was that it was “difficult to gather as much economic information in China as in the past.”
“China is becoming less transparent with businesses and this is impacting their ability to operate and comply with Chinese law,” said Sean Stein, president of AmCham China.
Chinese officials have become “even more reluctant to discuss important regulatory issues” with U.S. companies, Stein added.
AmChan’s annual China Business Climate Survey, surveyed by more than 300 companies on the continent and released in February, reveals that tensions between Washington and Beijing remain their top concern for the fourth year in a row.
However, the chamber noted a recent resumption of high-level dialogue. US Secretary of State Antony Blinken will visit China this week, following a series of senior official trips this year and a meeting between Xi and US President Joe Biden in San Francisco in November.
US Treasury Secretary Janet Yellen this month expressed concerns about Chinese oversupply as Beijing increases investment in manufacturing.
China’s Foreign Ministry on Tuesday denounced the U.S. complaints, saying they represented “the malicious intent to curb and suppress China’s industrial development.”
Stein said developments in U.S. policy also created “greater complexity” for U.S. businesses in China. “The end result is that businesses find themselves caught between the two governments,” he said.
Additional reporting by Wang Xueqiao in Shanghai