Amid the Ukraine-Russia crisis, China is trying hard to please the West by announcing several unofficial sanctions on Russia. The energy companies in China have stopped importing coal and oil from Russia. It has also banned Russia from participating in the upcoming winter Paralympics. Adding to it, the Chinese government-backed Asian Infrastructure Investment Bank has halted doing trade with businesses related to Russia.
But this rampant bootlicking is hardly yielding any positive result. Despite incessant attempts of wooing the western governments and stabilising its economy, around one-third of foreign companies have announced they will disinvest from China due to policy uncertainties.
One-third of foreign companies to reduce their stakes in China
A Wall Street Journal report has now revealed that foreign companies are now feeling less confident about doing business in China. A survey by the American Chamber of Commerce in China has also stated that more than 33% of foreign companies are eying to reduce their stakes in China as soon as possible. But why is this happening despite China’s unrelenting efforts to shore up its economy?
- China’s Covid policy: Most companies believe that China’s travel restrictions are a headwind when it came to attracting and retaining talent. Zero Covid policy has aggravated supply chain issues. More than three-fourths said qualified job candidates were unable to move to China. Also, foreign workers are increasingly shunning employment offers in China.
- Tensions between the US and China: Despite the Biden administration’s softened approach towards the communist nation, WSJ reports that the Trump-era sanctions imposed on the nation are still preventing the bilateral economic ties from flourishing. Alan Beebe, the president of AmCham China was quoted as saying by WSJ that “I think reality has in a way set in, in that at least some, if not many, of the actions by the Trump administration, remain in place.”
- Unclear policies: Foreign companies have stopped trusting the Chinese communist party. The crackdown measures launched last year have already diminished investors’ confidence in the Chinese market. Adding to that, inconsistent or unclear regulations and rising labour costs are other leading worries.
- Human rights issues: Nations like Japan and Australia, along with trading blocs like the EU have made it compulsory for their companies to eliminate even a minute element of forced labour and human rights violation from their supply chains. This is bound to force some foreign companies to divest from China, and rather invest in democratic nations like India.
And now, even China has realized its economic fall is imminent. The Chinese government last week set its growth target for this year at around 5.5%, the slowest pace in about a quarter-century of economic planning; reflecting growing domestic and global uncertainties.
Foreign brands often found themselves at odds with the Chinese government over issues related to China’s contentious activities in Xinjiang and Hong Kong. More than 40% of respondents in the AmCham survey reported increased pressure to either make or not make politically sensitive statements compared with the previous year.
Be it the US, Japan, or India, China’s brutish foreign policy has frayed its economic ties with almost every major economy of the world. And now, foreign companies want to reduce their stakes in China as soon as possible to prevent the disaster engulfing China from harming their business interests. So, the result from the AmCham survey looks reliable on all accounts.