Local officials of the Chinese Communist Party are seeking foreign investment overseas, but investors are concerned about the party’s top leadership being “capricious” and making sudden changes. For example, just after officials from Inner Mongolia actively promoted a rare earth project for investment in Singapore, Beijing announced stricter controls three days later.
According to a report by Bloomberg on Wednesday (July 3), Chinese officials are facing skepticism and questioning when promoting foreign investment opportunities overseas, a sentiment that was palpable at a banquet hall in a four-star hotel in Singapore last week.
Officials from Inner Mongolia were pitching the region’s rare earth industry to dozens of potential investors. One attendee questioned whether Beijing truly welcomes foreign investment in such minerals, as they have become a focal point of tension between China and the US and are subject to export controls.
After local officials provided assurances, Beijing tightened regulations on the management of these resources three days later. This highlights the practical challenges Chinese officials face in convincing companies to invest in China.
Western business leaders operating in China told Bloomberg that mixed messages from Beijing on security and the economy are making investors more cautious.
In May, officials from Hunan Province tried to generate interest in their technology park at a hotel in downtown Singapore.
An official mentioned that such overseas trips were rare before the COVID-19 outbreak, but with the slowdown in the economy, the Ministry of Commerce in Hunan Province urged them to seek investors abroad. Due to the sensitivity of the discussion, this official declined to reveal their identity.
Dominic Chiu, a senior analyst at the Eurasia Group focusing on China and Northeast Asia, stated that Chinese officials are going abroad because the central government has given them clear instructions to attract foreign investment in order to advance in their career.
Following a sudden lifting of stringent COVID-19 restrictions by the Chinese government, the economy did not rebound as expected but faced a sluggish real estate market, further weighing down domestic spending. Trade tensions with Europe and the US have also cast a shadow over China’s manufacturing sector.
In June, a district delegation from Beijing visited France and the United Arab Emirates to explore investment opportunities. In May, officials from a manufacturing region in Sichuan Province in the southwest visited Cambodia, while a delegation from Shaanxi Province in the northwest visited Denmark, Germany, and Austria.
These delegations are usually composed of business leaders who are also looking to expand overseas amid low domestic demand.
Investors are displaying a cautious attitude amidst the contradictory movements of the Chinese Communist Party cracking down on investment activities while also announcing further economic opening. Data released by the Chinese authorities on June 21 showed that the indicator measuring foreign direct investment (FDI) in terms of “actual use of foreign funds” has been declining for 12 consecutive months.
Sun Yun, director of the China Program at the Stimson Center in Washington, told Bloomberg, “Once confidence is lost, it is difficult to restore.” She mentioned that the success of Chinese officials in their overseas sales activities is still “to be observed.”
Earlier this year in Singapore, a participant asked Shanghai officials whether China protects private property. This echoes concerns raised by business figures after the Communist Party cracked down on the education and technology industries.
Lu Xi, a senior lecturer at the Lee Kuan Yew School of Public Policy, stated that due to tighter regulations on officials’ overseas travel within the country, the duration of their trips abroad is typically limited to a week. He mentioned that the outcomes of such visits vary.
It is reported that these officials must hand over their passports, which are only returned to them just before their trip.
Lu Xi has been in contact with these delegations. He told Bloomberg that for lower-level Chinese delegations, the success rate is almost zero.
He remarked that these activities are “essentially just for show” and rarely lead to substantive investment cooperation.