BEIJING/HONG KONG, Nov 28 (Reuters) – Jordan England, the head of a U.S. furniture company, believes his Chinese suppliers are among the best in the industry, but geopolitics and the economic slowdown are making it difficult for Southeast Asia, Eastern Europe, Mexico.
“I’m moving away from there (China),” said England, co-founder and CEO of Florida-based Industry West.
“There’s always a ‘China Plus one.”
Now, he added, “it’s like ‘Plus 10’ and China,” with the latter providing half of Industry West’s products and set to be further reduced.
Foreign investors have been unfavorable toward China for much of this year, but data released over the past month shows that risk-averse strategies are having a negative impact on the world’s second-largest economy. showed clear evidence that
The activity survey showed that manufacturing contracted unexpectedly in October, with exports accelerating the decline. China recorded its first-ever quarterly deficit in foreign direct investment in the July-September period, indicating pressure on capital outflows.
Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, said in a note that new data shows that foreign companies are not only reinvesting their profits less, but also selling existing investments and repatriating funds. He said that it suggests that he is doing so.
This trend could further weaken the renminbi and hurt China’s economic growth potential, he added.
“In recent years, the scale, proportion and growth rate of foreign investment absorbed by China have all remained at relatively high levels,” said He Yadong, spokesperson for the Chinese Ministry of Commerce, in response to a question from Reuters.
long term outlook
Businesses have long had concerns about geopolitics, increased regulation and a more favorable competitive environment for state-owned enterprises. But for the first time in four decades since China opened up to foreign investment, executives are also concerned about long-term growth prospects.
More than two-thirds of CEOs surveyed said demand in China had not returned to pre-COVID-19 levels, and 40% said they are reducing equipment to China, according to a survey released last week by the Conference Board think tank. This indicates that investment is expected to decline even more than this year. It expects jobs to be cut at a similar rate over the next six months.
China is ostensibly confident of growth despite the global economic slowdown, with policy advisers backing a goal of expanding gross domestic product by about 5% in 2024 and doubling the size of its economy by 2035. We aim to do so.
But England’s prime minister said he was concerned about how Chinese suppliers, who also produce for the domestic market, would cope with the country’s severe downturn in the property market.
“I’m worried that the number of employees in these factories will go from 500 to 200 to 100,” he said.
Open?
Trade groups say Premier Li Qiang’s overture to open up China’s business to foreign investors after the pandemic comes in light of broader anti-espionage laws, raids on consultancies and due diligence firms, and bans on withdrawals. The move has reportedly been met with skepticism in some Western boardrooms.
Mr. Li is expected to make a similar call on Tuesday at the country’s inaugural China International Supply Chain Expo, which the country is expected to use to tout its supply chain advantages.
“Foreign business executives here are keen to continue doing business in China,” said AmCham President Michael Hart. “But U.S. boards are cautious.”
While European companies have expressed fair competition concerns about government-sponsored financing for Chinese manufacturing, Noah Fraser, managing director of the Canada-China Business Council, said that between 2018 and 2021, two Canadian Regarding his arrest, he said there was a “bad bloodline” remaining.
In private equity, Asia-focused funds are allocating capital to China, but as of November 24, 2023, China-focused buyout funds in any currency will While it has not been raised, it will be $210 million in 2022 and $13.2 billion in 2022. 2019, before the pandemic.
Fred Hu, founder of Primavera Capital, cited persistent concerns over heightened macroeconomic uncertainty, an “uncertain capital market outlook” and past regulatory crackdowns on high-growth industries such as technology and education. ing.
“High-tech companies and other private enterprises must be able to tap public markets for financing and liquidity, so China’s current market conditions have a significant negative impact on the real economy,” Hu said. , added that China-focused private equity firms are directing funds to the southeast. Asia, Australia, Europe.
Despite challenges, the flow of foreign investment is not unidirectional. Many companies, especially in the retail sector, are still targeting China’s huge market. McDonald’s (MCD.N) announced last week that it had entered into a deal to increase its stake in its China operations.
An executive at a European hotel chain, speaking on condition of anonymity due to the sensitivity of the topic, said the company was happy to reinvest profits in China for now.
“We know what’s going on politically and economically,” he said, adding that the latest data was “not something to be proud of.”
“It’s slow, but it only justifies taking a ‘wait and see approach’.”
Joe Cash and Ellen Chan report from Beijing and Kane Wu from Hong Kong. Additional reporting by Eduardo Baptista and Don Durfee in Beijing. The graphics are by his Kripa Jayaram. Written by Marius Zaharia.Editing: Jamie Freed
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