Commentary on Political Economy

Tuesday 19 March 2024

China Tries To Woo Foreigners, But It Is A Hard Sell

China’s government is rolling out a charm offensive to lure back foreigners, part of an effort to shed years of pandemic- induced isolation that is sapping the world’s second-largest economy.

It’s a tougher sell than it used to be.

In recent months, China has made it simpler and cheaper for business travelers and tourists to get visas and scrapped visa requirements for some entirely. It has extended tax incentives to make life for foreign residents more appealing. Chinese Premier Li Qiang pledged further moves to rebuild the “Invest-in-China” brand at the country’s annual legislative meetings earlier this month.

The campaign marks an effort to restore the global ties that helped power China’s decades of record-breaking growth, which Beijing severed during the pandemic as President Xi Jinping elevated security above all else.

Now China is trying to regain its allure for foreigners in a different era, with a slowing economy and tightening social controls. A rising chorus in Washington portrays engagement with China as suspect.

And there is lingering distrust in the country’s government stemming from the zero-Covid policies and a nationwide anti-espionage campaign.

One U.S. business executive said he was unsettled in mid-2023 when a group of nine police officers showed up at his door in Beijing one evening, demanding to examine his passport and confirm his employer. The officers didn’t give a reason for the visit, he said. “It’ll take a long time to restore the broken trust over the last couple of years,” the executive said.

China handed out 711,000 residence permits to foreigners last year, down 15% from pre-pandemic 2019, according to the National Immigration Administration. Short-term visitor numbers, which include business travelers, dropped even more, falling two-thirds over the same period.

The severity of the challenge is apparent in Shanghai, a glimmering financial center that once teemed with foreigners of all stripes. The number of new foreign-worker permits fell to 50,000 in 2022 from about 70,000 in 2020, according to official data.

The city is still struggling to recover its cosmopolitan flair nearly two years after a Covid lockdown persuaded many expatriates to flee.

“When we go out to restaurants and malls on the weekends, I’m usually the only white guy,” said Graeme Allen, an Irish national who runs an Irish-themed bistro in the city.

To be sure, Allen and others say there seems to have been an uptick in foreign visitors recently, with many arriving to attend international exhibitions that have reopened in China. A major bottleneck is also expected to ease soon with the number of weekly round-trip flights by Chinese carriers between the U.S. and China set to increase to 50 at the end of March from 35 currently.

Still, those flights are a fraction of the number before 2020. And even a significant increase in round-trip routes won’t address the fundamental changes discouraging foreign interest in China, said current and former expatriates, diplomats and business consultants.

The trend marks a stark reversal for China, once seen around the world as a land of opportunity.

“If you’re a foreigner with a family and looking to grow your career, you no longer need to be in China, now that destination is Southeast Asia, India or the Middle East,” said Cameron Johnson, a supply-chain consultant in Shanghai.

As people have departed, so has money. Foreign investment flows into China dropped 8% to about $157 billion last year, the first decline in 10 years, China’s commerce ministry said in January. China is increasingly seen as a source of risk.

“Back in the day, China was the place where things happened. Upwardly mobile executives were fighting to come to China,” said Sean Stein, a senior adviser at Covington & Burling’s Public Policy Practice. Now, he said, “people don’t see that there’s an upside.”

Chinese authorities recently doubled a fine imposed on the Beijing arm of New York-based due-diligence firm Mintz Group, whose local staff were detained in an office raid last year that rattled the foreign business community. The government accuses Mintz of conducting “foreign-related statistical investigations” without approval, an allegation the company disputes.

Economists said that foreign executives bring advanced knowledge and skills that China still needs. Meanwhile, foreign capital and investor interest have grown increasingly important as the government scrambles to restore confidence in an economy struggling with sluggish growth and a property-market downturn.

For multinationals, the inability to persuade executives to be stationed in China can lead to disconnects with headquarters and struggles ensuring a company’s values are maintained in the country. In the longer term, longtime expatriates said, the lack of foreign interest could deplete the population of bridge builders between China and the world.

The last time the government released detailed figures on long-term foreign residents was 2021, when the country published its once-a-decade census. Data from other sources show that expatriates from some of the world’s biggest economies have dwindled in recent years. In 2023, the number of registered South Koreans fell 30% from 2019 to 216,000, government data show. Registered Japanese citizens in China declined by 13% in the same period to 102,000, according to official figures.

A U.S. Embassy spokesperson said it doesn’t track citizen numbers in China. Even so, demand for adult passport renewals sharply decreased in China versus prepandemic levels, the spokesperson said.

The U.S. government has played a role in discouraging foreign engagement with China. The State Department has kept China on its “reconsider travel” list since March, citing the risk of detention and arbitrary enforcement of local laws. Meanwhile, U.S. business ties to China have come under increasing scrutiny in Congress.

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