Spy balloons in the American midwest, warnings from Beijing of a war if Washington “can’t hit the brakes” and intense congressional scrutiny of Chinese investment – it couldn’t be worse time for US business to attend a major investment conference in Beijing.
But this weekend, former secretary of state Henry Kissinger, investor Ray Dalio and American business chiefs including Procter & Gamble’s Jon Moeller will head to Beijing for what is being billed as an opening party after three years of strict zero-Covid policy.
Many of the businessmen attending the China Development Forum will see their mainland operations and meet with Beijing officials for the first time in three years. But while the Davos-like event focused on “opportunities and cooperation” as China’s economy rebounds from the pandemic, headwinds facing US business interests in China also come from Washington.
“They’re making so much money from their investments, their factories and their engagement there now that they’re lobbying here for free for China,” Florida senator Marco Rubio said this month of US businesses and individuals operating in China.
A complete list of attendees is not available. Senior government regulators and policymakers are expected to be there, including possibly Li Qiang, Xi Jinping’s number two and the head of China’s cabinet. Panel participants and speakers included Mike Henry, chief executive of BHP, Liu Jin president of state-owned Bank of China, Robert E Moritz, global chair of PwC, Zhao Dong, president of Chinese oil company Sinopec and Noel Quinn, chief executive of HSBC, as well as several leading academics. Those from the US are expected to attract home inspection.
“I don’t think the Americans will sit on it, but they can do whatever they can to stay in the background and out of the limelight,” said Francis Bassolino, managing partner of Alaris Consultancy in Shanghai.
Last month, Geoffrey Siebengartner, an official of the American Chamber of Commerce and head of government affairs and corporate responsibility in Asia Pacific for JPMorgan, was the focus of a select committee in Washington after appearing in a video highlighting Hong Kong. Beijing imposed a National Security Law in 2020 that prompted sharp criticism from the US.
That incident, which followed controversy over a Chinese balloon in US airspace, chilled a mainland foreign business community already alienated by the country’s strict zero-Covid policy.
In the past, the benefits of Chinese investment have offset the perceived risks for foreign companies of technology transfer, market overreliance and political criticism, said Duncan Clark, an author and advisory chair. firm BDA China. “The difference now is that companies face much greater scrutiny from Congress,” he said.
Mark Warner, a senator who chairs the select committee on intelligence, said that private equity firms in the US are paying more attention to the concerns of lawmakers. “We had 40 Business Roundtable CEOs and there were others who said, ‘You know, things in Taiwan just don’t take off?’ I think we might have dissuaded them from that view,” he told reporters.
Denis Depoux, a global managing director based in Shanghai at the consultancy Roland Berger, speaking at the forum, suggested that “everyone is more cautious of the potential political implications of the presence here”.
“How likely is it that my business is affected by American sanctions, or if not sanctions, are often asked by bodies like Congress?” he said. “This [about] imagining what will happen next.”
Recent earnings calls from the US, however, show that awareness of the geopolitical landscape is tempered by optimism in the Chinese market.
Seifi Ghasemi, chief executive of Air Products & Chemicals, told Wall Street in February that “the political situation” has not affected its operations or Chinese customers’ acceptance of its products. Colgate-Palmolive in February told analysts that its market share growth in China was a “beautiful story”, while Illinois Tool Works said last year it surpassed $1bn in China revenue for the first time . “We feel very good about China,” it said.
You see a snapshot of an interactive graphic. This is most likely due to being offline or having JavaScript disabled in your browser.
Dale Buckner, chief executive of Global Guardian, a security consultancy, said Russia’s invasion of Ukraine had prompted a “more real conversation” about the dangers of China’s isolation but added that he had not know that any companies that leave China.
The geopolitical climate may counter-intuitively encourage some companies to invest more heavily in Chinese supply chains so that their operations there can stand on their own in a decoupling scenario. A 2023 report by Deloitte suggests that there are several scenarios for companies, such as establishing joint ventures with a majority or minority share for multinationals depending on how severe the decoupling is.
“China remains, arguably, the most attractive growth market in the world – for companies that can expect rapid, fundamental change,” the report said.
Meanwhile, Li, China’s new premier, said this month that in his previous role as head of Shanghai “senior managers of multinational corporations, including many American companies . . . everyone tells me they are optimistic about the future of Shanghai and China”.
“Some in the US are promoting the idea of decoupling from China,” he added. “But I wonder how many people can really benefit from this kind of hype?”
In a recent survey, the American Chamber of Commerce in China found that a record of more than 50 percent of companies did not make a profit in China last year. But Michael Hart, its president, said this year “it looks like the economy is going in the right direction”.
He estimates that half of the world’s current crop of chief executives is not in China because of the pandemic.
“The China Development Forum will be important to see what [message] the European and some US CEOs [in attendance] go along,” he said.
