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Workers work on a production line at a silk workshop in Haian, Jiangsu province, China.
In an uncharacteristic acknowledgment of weakness, China on Sunday announced a plan to attract more foreign investment and boost its stagnating economy. The 24-point plan aims to improve the climate for FDI, which has taken a hit from the Communist Party’s unpredictable and occasionally hostile policies towards foreign companies.
New foreign investment in China fell to its lowest level in 25 years in the second quarter of 2023. At the same time, China’s economy is also suffering from deflation, local government debt, and a declining real-estate sector. For more on China’s economic woes, watch Ian Bremmer’s interview with Shaun Rein, founder and managing director of the Shanghai-based China Market Research Group, on this week’s GZERO World here and read our explainer here.
Beijing’s new plan targets key industries, such as biopharmaceuticals and telecommunications, offering tax deductions and incentives. It also makes it more convenient for foreign companies to apply for visas and residence permits.
But this comes at a time when foreign investors increasingly see China as an unsafe place to invest their money, especially since new anti-espionage laws give authorities sweeping authority to access and control foreign business data.
Meanwhile, US companies are pulling out of China in droves over fears for employee safety and amid rising tensions between Washington and Beijing after a series of US-based consulting firms were raided in China this spring.
We’ll be watching to see whether Beijing does anything to relieve these fears underlying the decline in Chinese FDI.