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China to Make Its Business Environment More Friendly for Foreign Companies

The head of the central bank of China announced his intention to open up the country’s financial industry to closer cooperation with foreign companies and make the local business environment favorable for the activities of brands from other states.

China to Make Its Business Environment More Friendly for Foreign Companies

These statements reflect Beijing’s efforts to create conditions for gaining foreign capital, which is extremely important against the background of serious problems in the economic system of this Asian country. In this case, the government’s steps aimed at open cooperation with foreign companies are rather not the result of a rethinking of the state’s development model, but to a large extent a forced measure intended at correcting a difficult situation, which, in case of inaction on the part of the authorities, will worsen and gradually transform into a large-scale crisis.

Pan Gongsheng, governor of the People’s Bank of China (PBOC) and head of the country’s foreign exchange regulator, chaired the symposium with representatives of abroad companies, including JP Morgan, Tesla, HSBC, Deutsche Bank, BNP Paribas, MFUG Bank, BASF Trafigura and Schneider Electric. The relevant information is contained in a statement that was published on the websites of the People’s Bank of China and the State Administration of Foreign Exchange (SAFE).

This event, as noted in the official message, was held in order to increase financial support, which is necessary to stabilize the situation in the field of foreign trade, and to contribute to the growth of foreign investment in the Chinese economic sector. It was also separately stated that the symposium is important as an event on the way to improving the investment environment for companies from other countries.

Recently, interest in China as a space of economic and industrial opportunities has begun to show a negative trend of decline. Foreign investors are not without fears and anxieties assessing the prospects of the world’s second-largest economy. These moods, which do not contain a stable and unconditional faith in a bright future, are the result of objective reasons. Currently, weak domestic demand is recorded in China. Another form of unfavorable reality is the crisis in the housing sector. Also, the general downturn in the Chinese economic system does not contribute to optimism about the future. All these factors form a completely fair opinion of investors that the current historical moment in the material and applied sense is not the best for interaction with this country.

Also, the financial and economic dimension of China’s existence is now difficult to characterize as favorable for potential foreign partners because, according to some experts, Beijing’s excessive attention to national security issues, turns into too strong control over business. Another factor that repels investment by companies from other countries is the high level of tension in relations between China and many Western states.

According to information released by the Chinese Ministry of Commerce at the end of last week, according to the results of the first eight months of this year, the volume of direct investment in the country showed a decrease of 5.1% compared to the same period in 2022. Against the background of this trend, it is obvious that there is a need for an integrated approach to correcting the current situation, rather than point solutions that contribute to the improvement of individual circumstances but do not eliminate the problem.

SAFE data released last month shows that in the period from April to June, direct investment commitments decreased to $4.9 billion. This figure is 87% less than a year earlier.

The American Chamber of Commerce in Shanghai conducted a study of the business climate, which revealed that 40% of respondents redirect or plan to redirect investments that were originally intended for China to other countries, mainly to Southeast Asia. Last year, 34% of respondents committed similar actions.

The share of companies that positively assess the prospects of the Chinese economy over the next five years is 52%. This figure is the lowest in the history of surveys conducted by the American Chamber of Commerce in Shanghai.

Last month, US Commerce Secretary Gina Raimondo said during a tour of China that some American companies had informed her that this country had become unfit for investment. A representative of the Ministry of Foreign Affairs of China in response to this said that the state remains one of the most important areas of investment in the world.

The companies attending the meeting of the People’s Bank of China stated the need to improve business conditions. Pan Gongsheng said that local authorities will continue to optimize political mechanisms and create a market-oriented environment. He also stated that regulators will form a more advanced financial services industry in the future.

As we have reported earlier, China’s Central Bank Calls On Financial Sector to Help Fund Technology Research.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.