US business group says policy ‘inconsistency’ hurting China investment

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Policy “inconsistency” in China is discouraging foreign investors despite Beijing’s efforts to reassure international companies, a leading American business lobby group has said.

China’s President Xi Jinping last month sought to boost confidence among foreign investors, telling visiting US chief executives that his country’s growth prospects remained “bright”.

But an annual report issued by the American Chamber of Commerce in China on Tuesday highlighted concerns about a lack of regulatory clarity and consistency in policy and its implementation that it said had led to a “cautious approach” among investors.

“There’s inconsistency,” Michael Hart, AmCham China president, told a press conference. “Something said in one month may not necessarily be implemented in practice in the months to come.”

AmCham China’s 600-page report cited examples where clarity fell short such as “ambiguous policy guidance and directives” regarding the import and export of seeds, inconsistent review standards in the cosmetics industry and an unclear cryptography law introduced in 2019.

It also highlighted what it described as rising pressure on foreign companies, including “stringent data control policies”, “raids on consultancies”, “closure of databases” and “concerns over the ambiguity of newly enacted and enforced national security, data security and counter-espionage laws and regulations”.

These issues “have led to a perception of increased risk”, the report said.

Chinese balance of payments data suggests foreign direct investment last year fell to its lowest level since the 1990s. Commerce ministry data released last week showed FDI in China fell 26 per cent year on year in the first quarter of 2024 to Rmb302bn ($42bn).

Beijing has focused heavily on national security since the coronavirus pandemic, introducing an amended anti-espionage law last year and tightening control of domestic information and data after easing years-long restrictions under which borders were in effect closed.

Hart said that among the “principal concerns” of the chamber’s members was that it was “difficult to gather as much business intelligence in China as it has been in the past”.

“China is becoming less transparent to businesses and it’s impacting their ability to operate and be compliant with Chinese law,” said Sean Stein, AmCham China chair.

Chinese officials had become “even more reluctant to discuss important regulatory matters” with US companies, Stein added.

AmChan China’s annual business climate survey, which surveys more than 300 companies in the mainland and was published in February, found tensions between Washington and Beijing remained their leading concern for the fourth consecutive year.

However, the chamber noted a recent resumption in high-level dialogue. US secretary of state Antony Blinken will this week visit China, following a series of trips by top officials this year and a meeting between Xi and US President Joe Biden in San Francisco in November.

US Treasury secretary Janet Yellen this month raised concerns about Chinese oversupply as Beijing increases investment in manufacturing.

The Chinese foreign ministry on Tuesday hit out at the US complaints, saying they represented “the malicious intention of curbing and suppressing China’s industrial development”.

Stein said developments in US politics were also creating “greater complexity” for American companies in China. “The end result is companies are getting squeezed between the two governments,” he said.

Additional reporting by Wang Xueqiao in Shanghai