Why US Businesses Can’t Wait to Get Out of China

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After fueling China’s growth for decades, American businesses are now pulling out, as its political and business landscapes shift.

Foreign investments are leaving China.

Half of the $250 billion to $300 billion foreign bond investments since 2019 have exited, and U.S. private equity and venture capital investments in China have fallen by more than 50 percent, according to a JP Morgan report last month.

Foreign direct investment (FDI) into China in the second quarter of this year reached a 25-year low at $4.9 billion, with a year-on-year decline of 87 percent, according to Chinese official data.

Bloomberg and FDI Markets data on new investment projects—a more telling indicator of whether foreign firms are still investing in the country—show a 40 percent drop, to $74 billion in 2020 from $120 billion in 2019, and an additional 45 percent decline to $41 billion in 2022—the lowest since 2010.

Although financial transactions are easy to track without much lag, it may take years for foreign direct investment data to reflect Western firms’ diversifying away from China.

For this reason, Beijing might be unaware of how bad things really are as far as foreign direct investment, analysts of the Rhodium Group, a leading research firm on the Chinese economy, warned in a recent report.

“Amidst a broader structural slowdown in China’s economy, the delayed reactions could contribute to further losses in productivity and economic growth,” the report stated.

The implied assumption here is that preventing economic losses is a priority for the Chinese Communist Party (CCP). However, some China experts challenge this.

“It’s not that Xi Jinping and the CCP leadership hate economic growth—it’s just not a priority,” Derek Scissors, chief economist of research firm China Beige Book and a senior fellow at the Washington-based think tank American Enterprise Institute, told The Epoch Times.

“The priority is control over the society, including the economy. So whenever there’s a trade-off between economic control and growth, they choose control,” he said.

“And when we say, ‘Oh, you know, you could be growing faster. Why are you doing these things?’ The answer is obvious: It’s because that’s not their priority.”

By Terri Wu

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