China’s economy is stagnating, with foreign investment continuing to decrease. From January to September this year, actual use of foreign investment dropped by a significant 30% compared to the same period last year. Vice Premier of the Chinese Communist Party, He Lifeng, who oversees the economy, has been described by foreign media as an awkward “gatekeeper”: not welcoming foreign investment, but rather safeguarding the CCP system from Western influence. However, with the economic downturn, he is now forced to engage with foreigners.
According to a report by the state-owned People’s Daily on the 25th, from January to September 2024, China established 42,108 new foreign-invested enterprises, a growth of 11.4% compared to the previous year. The actual amount of foreign capital used was 640.6 billion yuan.
Interestingly, this figure of 640.6 billion yuan actually represents a significant drop of 30.4% compared to the previous year, a fact that was not highlighted in the People’s Daily report.
While Chinese government websites and other mainland media outlets mentioned the 30.4% decline in actual foreign investment utilization, they chose to emphasize the increase in the number of newly established foreign-invested enterprises in their headlines.
Data from last year showed that from January to September 2023, China established 37,814 new foreign-invested enterprises, a growth of 32.4%, but the actual foreign capital utilization dropped by 8.4%.
Commentator Li Lin expressed to Dajiyuan that official CCP data consistently portrays an increase in the number of newly established foreign-invested enterprises each year, but in reality, the actual foreign investment is decreasing annually. He stated that the establishment of these enterprises is merely superficial, and while numbers can be manipulated, real investment is what matters, and that aspect has seen a significant decline this year. The Party media is hesitant to report on this grim situation.
Amid China’s weakened economy and geopolitical factors, coupled with the CCP’s increased monitoring of foreign companies under the guise of “national security,” many foreign enterprises are contracting their operations in China or even closing down.
On October 21, global asset management giant Fidelity International was reported to be laying off 500 employees in China.
American consulting firm McKinsey reportedly cut around 500 positions of its Chinese staff this month, after reducing its number of clients related to the Chinese government.
US-based multinational tech company HP relocated its personal computer production center out of China in August.
Japan’s largest tire manufacturer Bridgestone closed its factory in Shenyang earlier this year, resulting in the dismissal of over a thousand employees.
Since 2023, many globally renowned companies have been gradually pulling out of China, including Canon of Japan, Samsung of South Korea, Sony and Toshiba of Japan, Nikon, Amazon, LinkedIn, Microsoft Development Center, Anstalt Pharmaceuticals in the US, among others. These companies have relocated their supply chains to Thailand, the Philippines, or back to their home countries.
The Wall Street Journal reported yesterday that some high-ranking CCP officials are specifically tasked with interacting with foreigners, with Vice Premier He Lifeng being the latest official to assume this role. When US Treasury Secretary Janet Yellen visited Beijing earlier this year to persuade CCP leader Xi Jinping on the issue of overcapacity in China, she sought to meet He Lifeng as information could reach Xi through him.
The report mentioned that He Lifeng, who oversees the economy and finance, initially focused on countering Western sanctions. Xi Jinping assigned him the task of not welcoming foreign investment but rather acting as a gatekeeper to protect the CCP system from Western influence.
It pointed out that under He Lifeng’s tenure, the Chinese economy has gradually deteriorated, with trade frictions intensifying. This year, overseas investment in Chinese factories, stores, and other hard assets has plunged by over 30%, marking a staggering shift. With foreign capital withdrawing, He Lifeng has had to find ways to engage with the West.
What stands out about He Lifeng’s background is his close relationship with Xi Jinping in their early years in Fujian. He Lifeng led many large projects aimed at stimulating the Tianjin economy during his tenure there, but eventually led Tianjin into heavy debt. After taking charge of the National Development and Reform Commission, he poured billions of dollars into high-speed rail, airports, and water tunnels, leading to a continuous accumulation of debt across China.
Western business executives who have met with He Lifeng believe that he thinks in a manner similar to Xi Jinping, placing faith in centralized planning and control, unlike his predecessors who could delicately balance the pros and cons of steering China towards marketization.
As the US presidential election approaches and the cracks in China’s economy become increasingly apparent, He Lifeng’s task has become more urgent. Reports indicate that in recent months, he has arranged additional time to meet with foreign businessmen, sometimes doubling the originally scheduled time.
However, there are doubts in the external world about this gatekeeper trusted by Xi Jinping, as to whether he will attempt to persuade Xi to let go of his wariness towards the West due to economic needs.
Associate Professor Feng Chongyi from the University of Technology Sydney previously expressed to Dajiyuan that former Vice Premier Liu He had some technical bureaucratic background and maintained close ties with the economics and market-oriented factions. On the other hand, He Lifeng came up as a Party cadre, echoing political slogans set by Xi Jinping without any novel ideas. The measures they have set forth are not helpful in addressing the crises.