Isolated, China? |

“No, China is not closing in on itself”. This is in essence the message that Chinese leaders have been hammering out for a few weeks, to reassure foreign investors and silence critics on its uncompromising “zero Covid” strategy.

“China will keep its arms open”

“China cannot develop by isolating itself from the rest of the world, and the world cannot develop without China,” Vice President Wang Qishan told the Bloomberg New Economy Forum. “China will keep its arms open, provide more investment and growth opportunities for the world,” he added.

A few days earlier, in a video message delivered on the occasion of the inauguration of the 4th Shanghai Import Fair (CIIE), President Xi Jinping made an equivalent speech. Same story at the virtual summit organized with his American counterpart Joe Biden. During a dialogue (again online) organized by the World Economic World, Premier Li Keqiang made similar comments.

These promises of a China which will “continue to open up” may come as a surprise, while the country has been barricaded for almost two years, under the threat of a virus that it has seen birth.

Foreign companies, expatriates and students – who have never been able to return to China to complete their studies – are the first to deplore this situation. Due to the lack of prospects for easing sanitary conditions for 2022, many foreigners are considering leaving, tired of being separated from their families …

Between minus 22 and minus 42% of foreigners

According to a recent survey of 338 member companies of the American Chamber of Commerce (AmCham) * in Shanghai, more than 70% of them have difficulty attracting and retaining foreign talent – a finding shared by three quarters of European firms.

These difficulties delay or jeopardize investment decisions taken at headquarters, particularly in a context of growing mistrust of China.

However, it would be wrong to blame this exodus solely on the virus, the pandemic having only been a trend accelerator. According to data from the major decennial census published in 2020, only 856,000 foreign nationals of all nationalities (including 14,000 French) would reside on Chinese territory (not counting Hong Kong and Macao, which would welcome 13,000 French), representing 0.06 % Population. This is much less than the 2.8 million installed in Japan (2.2%), yet deemed to be a country “relatively closed” to foreigners. In Shanghai, the most international city in the country, the decline in 10 years is 22% (164,000 foreign residents), and 42% in the Chinese capital (62,000).

Increased cost of operations

How to explain this loss of attraction of the second world economic power? In addition to a general image that has deteriorated (pollution, political and ideological hardening, “combatant” diplomacy, etc.), competition on the Chinese labor market is increasingly strong, leading to a “sinization” of positions. An impending income tax reform should also make expatriation to China less attractive.

The business environment is not exactly in good shape either. Of course, China has opened up its market (reduced “negative” list of investments, end of the obligation of a Chinese partner in certain sectors), but it has not necessarily facilitated access (investment criteria, licenses, etc. ).

In addition, the pandemic has prompted the Chinese government to want to reduce its economic dependence on exports by strengthening its domestic consumption. This concept of “dual circulation” has every chance of benefiting Chinese brands, favored by growing nationalism (the latest 11.11 is an illustration of this).

Another factor: in the face of American hostility under the Trump administration, the Chinese government has made the goal of self-sufficiency – food, energy, technology – a priority, and the principle of “national security” an imperative. It is reflected in particular through a new regulatory framework applying to data collected in China and their transfer across borders.

To comply, foreign companies will be forced to duplicate their investments in China, which will increase the cost of their operations in the country.

A similar dynamic can be observed at the level of norms and standards, which will require a stronger localization of products intended for the Chinese market.

Result: only firms with a strong interest in remaining present on the Chinese market (which was obviously not the case with Linkedin and Yahoo) and with sufficiently solid financial backs, will make the necessary investments. The others will throw in the towel …

China’s growing isolation

This gap between official “welcoming” speeches and a reality on the ground which is complicated, is explained by the conflicting priorities of the Chinese government.

Well aware that the influx of capital, investment and foreign expertise during the past four decades, has significantly contributed to the “Chinese economic miracle”, China wants to continue to benefit, especially to help it become a power. technological.

But this priority collides with its health policy, which for the moment has the ascendancy over all the others. However, the longer this isolation lasts, the more serious the consequences for its relations with foreign countries (in the broad sense). When the country “reopens”, will the enthusiasm to return to China be the same? It is permissible to doubt …

* Sign of the times: the two presidents of AmCham, in Beijing and Shanghai, will also leave the country.