China courts Tesla, HSBC amid investor exits

In the wake of a significant A-share market sell-off and mounting concerns among investors, China’s central bank orchestrated a pivotal meeting with foreign banks and multinational corporations, pledging to enhance its policy support in the midst of evolving economic dynamics.

Prominent entities, such as JPMorgan, HSBC, Deutsche Bank, Tesla, and Schneider, were among the select attendees of Monday’s high-stakes gathering, each boasting substantial footprints within China’s business landscape.

This assembly took place just over a month following the issuance of guidelines by the State Council, China’s cabinet, where steadfast commitments were made to bolster safeguards for foreign investors. These assurances encompassed robust enforcement of intellectual property rights and the streamlining of pathways for expatriate employees to attain residency status.

In alignment with these strategic priorities, Pan Gongsheng, Governor of the People’s Bank of China, articulated the necessity for a “market-oriented” and “law-based” milieu that fosters the flourishing of businesses on Chinese soil.

Nevertheless, despite these proclamations and progressive policy adjustments, capital continues to divert its course away from China, propelled by apprehensions regarding national security regulations, the widening schism in Sino-US relations, and a waning growth trajectory, exacerbated by the distress afflicting the property market.

Recent data from the Ministry of Commerce unveiled that foreign direct investment in China experienced a year-on-year decline of 5.1 per cent, plummeting to 847.2 billion yuan (US$116 billion) during the January to August period. In tandem, the first seven months of 2023 witnessed a 9.8 per cent drop in US dollar-denominated foreign investment from the preceding year, totalling US$111.8 billion.

These concerns have cast a shadow on China’s economic outlook and have reverberated through the nation’s stock markets, causing turbulence in the world’s second-largest economy. Notably, foreign investors retreated by approximately US$15 billion from China in August, marking the highest monthly outflow ever recorded for the nation’s exchanges, as reported by the US-based Institute of International Finance.

As geopolitical tensions between Beijing and Washington escalate, overseas investors are diversifying their investment portfolios, increasingly eyeing the burgeoning economies of China’s Southeast Asian neighbours.

A recent report by the Economist Intelligence Unit underscored the rapid influx of foreign direct investment into Southeast Asian economies, projecting that the region’s total investment would surpass that of China’s by 2024.

While data for August demonstrated signs of growth in China’s domestic consumption and industrial production, expanding by 4.6 per cent and 4.5 per cent, respectively, a more substantial decline in property and private investments, dropping by 8.8 per cent and 0.7 per cent over the initial eight months, accentuated the challenging path to recovery that lies ahead.