The luster of China has worn off, even if the country puts up a show for foreigners

Sun Mar 17 2024
Lucy Harlow (4114 articles)
The luster of China has worn off, even if the country puts up a show for foreigners

A charm drive is being launched by the Chinese government in an attempt to entice foreigners back to the world’s second-largest economy, which has been severely impacted by years of isolation caused by the pandemic.

It’s more difficult to sell now than in the past. China has recently simplified and reduced the cost of obtaining visas for tourists and business travelers, and has even eliminated the need for visas for some. It has made living more attractive for foreign immigrants by extending tax benefits. Speaking at China’s yearly legislative meetings earlier this month, Premier Li Qiang promised additional steps to restore the “Invest-in-China” brand.

Beijing abandoned relations during the pandemic as Chinese leader Xi Jinping prioritized security above all else; the campaign is an attempt to rebuild those ties and resume the global ties that powered China’s decades of record-breaking prosperity.

Amidst a faltering economy and stricter social regulations, China is now attempting to reawaken its charm for foreigners in a different era. There is growing consensus in Washington that any involvement with China is questionable. Furthermore, the zero-COVID rules and the countrywide anti-espionage effort have left a lasting impression of government incompetence.

A group of nine police officers unexpectedly turned up at the door of an unsuspecting American company executive in Beijing one evening in mid-2023. The officers demanded to see his passport and verify his employer, with one officer capturing the entire exchange on camera. The executive was understandably upset by this development. According to him, the police officers failed to specify why they had come.

Restoring the confidence that has been eroded over the past few years will be a lengthy process, according to the executive.

Following the 2019 pandemic, China’s National Immigration Administration reported a 15% decrease in the number of residency permits granted to foreign nationals, with 711,000 being distributed. Even more precipitously, the number of short-term visitors, which encompass business travelers, fell by two-thirds during that time.

This problem is particularly acute in Shanghai, a glittering financial hub that used to be teeming with foreigners of all persuasions. Official statistics show that in 2022, the number of new foreign worker licenses dropped to 50,000 from over 70,000 in 2020.

Nearly two years after a COVID-19 curfew caused many expats to leave, the city is still battling to regain its multicultural flavor.

According to Graeme Allen, an Irish national who owns an Irish-themed café in the city, “I’m usually the only white guy” when his friends and he go out on weekends to restaurants and malls. He added that although the number of expats had been decreasing before to the pandemic, many finally gave up and left after the COVID-19 lockdowns.

Indeed, according to Allen and others, there appears to have been a surge in international tourists as of late, with many traveling to China to attend the restored international shows. The number of weekly round-trip flights by Chinese carriers between the U.S. and China will climb to 50 by the end of March from 35 today, which is a significant improvement from the 35 that were in operation before the pandemic.

However, compared to the amount of flights before 2020, those are minuscule. According to diplomats, business experts, present and past expats, and even a large increase in round-trip routes won’t fix the underlying trends that are turning off foreign investors in China.

China, which was previously seen as a land of opportunity, has experienced a sharp reversal of fortunes due to this tendency. Among the most sought-after locations for international workers a decade ago were major Chinese cities like Shanghai and Beijing. During China’s economic boom, many students went to school to acquire Mandarin, and some stayed to work as bridge builders for global corporations. These days, a lot of multinationals are trying to broaden their business interests outside of China.

Cameron Johnson, a supply-chain expert based in Shanghai, stated that foreign nationals with families who are seeking professional advancement opportunities should consider Southeast Asia, India, or the Middle East rather than China.

Money has left along with the people. In January, China’s commerce ministry announced that FDI into the country fell for the first time in a decade, falling 8% to around $157 billion. The threat posed by China is being recognized more and more.

China used to be the epicentre of world events. Sean Stein, a senior counsel at Covington & Burling’s Public Policy Practice, which advises corporations on regulatory and legal concerns, said that upwardly mobile CEOs were vying to travel to China. People don’t see the positive side, he added.

Mintz Group, a due-diligence firm based in New York, had its local staff jailed in an office raid last year that shook the international business community. Chinese authorities recently increased the fine imposed on the Beijing section of the firm. In response to accusations that Mintz engaged in “foreign-related statistical investigations” without authorization, the government has filed charges, which the company denies.

Foreign executives, according to economists, contribute cutting-edge expertise that China is still lacking. While the government frantically tries to restore trust in an economy that is reeling from slow growth and a property-market slump, the importance of foreign capital and investor interest has only increased.

According to businesspeople, multinationals face challenges in maintaining their company’s principles in China and in communicating with headquarters when they are unable to convince executives to be stationed there. Expats who have been living abroad for a while worry that, in the long run, fewer people willing to serve as a link between China and the rest of the globe will be available, which could lead to greater levels of miscommunication and distrust.

Data about foreigners residing in or visiting China is not clear according to official sources. In 2021, during the country’s once-every-ten-year census, the government finally revealed all the numbers on long-term foreign residents.

Nevertheless, there is evidence from alternative sources indicating the number of expats from the world’s most economically powerful nations—those with substantial investment bases in China—has been steadily declining over the past few years.

Despite being one of the largest foreign communities in China, the number of South Koreans registered decreased by 30% from 216,000 in 2019 to 216,000 in 2023, according to government data. There was a 13% drop to 102,000 Japanese citizens registered in China within the same time period, as per official statistics.

Approximately 16,000 Britons are currently residing in China, which is more than half of what it was before the pandemic. This figure was estimated by the British Chamber of Commerce. No official tally is kept by the British Embassy, according to them.

The United States Embassy in China does not keep tabs on Chinese citizens, according to a spokeswoman. According to the spokesperson, there was a significant decline in the demand for adult passport renewals in China compared to levels before the epidemic. This decline is seen as an indication of the number of U.S. citizens present overseas.

Foreign interaction with China has been discouraged in part by the U.S. government. Because of concerns about arbitrary law enforcement and the possibility of arbitrary imprisonment, the State Department has maintained China on its “reconsider travel” list since March. At the same time, congressional investigators are looking into American companies’ relationships to China more closely.

In July, China eliminated the need for tourist visas for fifteen nations, among them Germany and France. The UK has also promised to reduce limits on cross-border data flows and remove market barriers for multinationals, two issues that international corporations find particularly problematic.

The recent trend toward economic dissociation makes reversing the outflow unlikely, according to Minxin Pei, a professor of China and politics at Claremont McKenna College. Pei argues that Beijing can prevent the breakdown of links between China and the West by stabilizing the geopolitical concerns surrounding the nation.

According to Pei, an exodus has a self-reinforcing logic: if your main client or supplier is leaving, you must also go.

Lucy Harlow

Lucy Harlow

Lucy Harlow is a senior Correspondent who has been reporting about Equities, Commodities, Currencies, Bonds etc across the globe for last 10 years. She reports from New York and tracks daily movement of various indices across the Globe