/ world today news/ About the consequences of attracting foreign capital to China
It is generally accepted that modern China has one of the most rigid verticals of government in the world. Formerly at the top of this power vertical in China were the emperors, now the Chinese Communist Party (CCP) and its General Secretary Comrade Xi Jinping. He simultaneously held the posts of Chairman of the People’s Republic of China and Chairman of the Central Military Council of the People’s Republic of China and the CPC.
In early February this year, when Russian President Vladimir Putin visited China, Comrade Xi repeatedly reiterated that our countries are allies. Since the start of the West’s collective sanctions war against Russia, Comrade Xi has declared that he is unequivocally siding with Russia. From these statements, it can be concluded that Beijing will not only not participate in the sanctions against Moscow, but will provide the necessary assistance to compensate for the possible losses of its neighbor.
Four and a half months after the start of the war, however, showed that China did not shoulder Russia. The US Treasury Department and the US State Department report from time to time that China is pretty much complying with all of the collective West’s sanctions requirements against Russia. And Washington has no claims against Beijing regarding anti-Russian sanctions.
So how then should we treat the words of Our companion? I am not a Sinologist and cannot know many aspects of the life of our eastern neighbor. At first it seemed to me that China’s strange passivity in fulfilling its allied obligations to Russia was due to the Eastern cunning of Comrade Xi. This version remains a staple for me so far. I am only now supplementing it with the version that not everyone in China is ready to unconditionally follow Comrade Xi’s orders.
A resonant publication by the American researcher Martin Chorzempa, an employee of the Peterson Institute for International Economics (PIIE), made me think about this. The article is called: Export controls against Russia are working – with the help of China. I already commented on it.
The results of a study of the available statistics on the export of Chinese goods to Russia are presented. From February 24 to April 30, the volumes of these deliveries fell sharply. Undoubtedly, this is the result of Beijing’s compliance with Western sanctions requirements.
The following words of the author interested me the most in the article: “The compelling factor for China’s compliance with Western sanctions is that foreign multinational corporations are responsible for half of China’s exports. These corporations must be connected to the global economy and apparently take orders not from Beijing but from their own headquarters in the sanctioned countries.”
I had to dig into the Peterson Institute site. There are materials there that show that TNCs directly or indirectly provide half of China’s exports. For example, Mary E. Lovely and Yang Liang’s 2018 article Trump Tariffs Primarily Hit Multinational Supply Chains, Harm US Technology Competitiveness.
Beijing has been attracting foreign capital to the country for a long time. It must be admitted that this policy of Beijing was quite balanced and cautious. There were restrictions and prohibitions on the work of foreign capital in a number of industries, restrictions on the share of participation of non-residents in the capital of a company, etc. However, each year the number of these restrictions decreased.
In part, Beijing’s foreign capital policy was dictated by the need to attract not so much money as new technology. As well as the possibility of entering world markets with the help of well-known Western corporations.
In part, we hoped that giving the green light to foreign investors in China would give the green light to Chinese investors in other countries (especially the US). Finally, this policy was motivated by Beijing’s desire to make the Chinese yuan an international currency, for which it is necessary to have at least minimal convertibility for non-residents in stocks, bonds and equity of companies operating in China.
Until 1992, the inflow of foreign capital into China was quite modest. Foreign direct investment in the Chinese economy from the early period (before 1992) in some years was (in billions of dollars): 1984 – 1.43; 1987 – 2.31; 1991 – 4.37. Here and below, all figures given are data from the Chinese Ministry of Commerce.
From 1992 to 2010, annual foreign direct investment in the Chinese economy was already in the double digits of billions of dollars. Here is the data for individual years of this time period (in billions of dollars): 1992 – 11.01; 1995 – 37.52; 2000 – 40.72; 2005 – 60.33; 2009 – 90.03.
And from 2010 to today, annual foreign direct investment (FDI) in the Chinese economy has grown to triple-digit billion dollars. Here are the data for all years of the last period (billion dollars): 2010 – 105.7; 2011 – 116.0; 2012 – 111.7; 2013 – 117.6; 2014 – 119.6; 2015 – 126.3; 2016 – 126.0; 2017 -131.0; 2018 – 135.0; 2019 – 138.1; 2020 – 144.4; 2021 – 173.5. In the first five months of 2022, FDI in the Chinese economy amounted to $87.8 billion. If this figure is extrapolated to the entire year, it can be assumed that annual FDI will reach the level of $200 billion for the first time.
Currently, the value of assets in the Chinese economy formed as a result of foreign direct investment is about 2 trillion dollars. These assets are distributed approximately as follows (%): processing industry – 25.5; real estate – 17.0; leasing and business services – 16.0; transfer of information, computer services and software – 10.6; scientific research, technical services and geological surveys – 8.0; wholesale and retail trade – 6.5; financial services – 5.1; transport and storage activity – 3.3; production of electricity, gas and water – 2.5; construction – 0.8.
By Russian standards, the number of companies with foreign capital established each year in China is fantastically large. According to the Ministry of Commerce of China, in 2021, about 48 thousand new enterprises with foreign investment were created in China (in 2020 – 38.9 thousand, in 2019 – 40.9 thousand, in 2018 – 60, 6 thousand).For comparison: in the autumn of last year, the number of companies with foreign capital in Russia, created in all previous years, was only 28.4 thousand.
It is noteworthy that in the first months of 2022, China had the most severe quarantine regime, and many predicted that there could be a serious decline in foreign investment in the Chinese economy. However, there was no decline. Although the restrictions related to the quarantine regime have not been completely overcome in China, foreign investors are eager to enter this country.
The investment climate in China is said to be incomparably better than that of the US or Europe. Especially today, when the Western economy is on the brink of recession, provoked by the sanctions war.
Which countries are investing in China coming from? According to data from China’s Ministry of Commerce, the US and European countries account for only a few percent of foreign investment. The majority of foreign capital falls on jurisdictions such as Hong Kong and Singapore, as well as the tax havens of the British Virgin Islands (BVI) and the Cayman Islands.
Companies with the participation of the capital of the specified jurisdictions can strictly carry out all commands coming from the West. The offshore jurisdictions (BVI and Cayman Islands) are under the strict control of the United Kingdom. Hong Kong and Singapore are also connected to London in many ways.
Martin Chorzempa writes: “It is impossible to disentangle the portion of the post-invasion export decline attributable to foreign-to-China companies, but it is clear that foreign multinationals are not the only driver of compliance.”
Yes, Chinese companies are too “the driving force behind compliance” of anti-Russian sanctions. They are often backed by Western multinationals, mostly American. Such MNCs do not seek to invest their money in shares and authorized capital in China. They are invisibly present in China, exercising non-proprietary forms of control over China’s largest companies.
Namely, concluding franchise agreements with the latter (providing the use of a corporate brand) and agreements for the transfer of rights to use technologies. The sale by Chinese companies to Russia of goods that use American technology can have the most serious consequences for such companies: the termination of technological agreements, the closing of the American market for the sale of products, the termination of the activities of the Chinese company in the United States,
Today, the negative consequences of Beijing’s many years of attracting foreign capital into the Chinese economy are showing, despite all the caution on the part of the CCP leaders. It turns out that China is not as sovereign as some think. It turns out that the Chinese economy is managed not only by Beijing, but also by the corporate headquarters of those countries that have imposed sanctions on Russia.
Translation: ES
Subscribe to our YouTube channel/top right/:
#controls #Chinese #economy #Communist #Party
