China's Xi meets with US leaders as businesses navigate bilateral tensions

Chinese President Xi Jinping speaks at the “Senior Chinese Leaders Event” hosted by the National Committee for U.S.-China Relations and the U.S.-China Business Council on the sidelines of the Asia-Pacific Economic Cooperation Summit (APEC) in San Francisco, California. United States, November 15, 2023.

Carlos Barría | Reuters

BEIJING American business leaders met with Chinese President Xi Jinping on Wednesday, the latest move by Beijing to boost foreign investment in China amid tensions with the United States.

Blackstone founder Stephen Schwarzman, Qualcomm Chairman and CEO Cristiano Amon, Bloomberg Chairman Mark Carney and FedEx Chairman Rajesh Subramaniam were among the attendees, according to state media.

The companies did not immediately respond to CNBC's requests for comment.

Earlier reports described the meetings as following Xi's dinner with U.S. business executives in San Francisco in November, following the Chinese president's meeting with President Joe Biden.

Executives and other representatives from major international companies were in Beijing this week for the annual China Development Forum (CDF), which ran from Sunday to Monday.

Top executives from multinational companies typically attend the state-organized forum, which is billed as the “first major international state-level conference” after China's annual parliamentary meetings in early March.

This year's forum coincided with other efforts to attract foreign businesses. Chinese authorities held an “Investing in China Summit” and officially relaxed once-strict data export requirements.

The Cyberspace Administration of China formally released much-anticipated new rules late Friday that eliminate government oversight of information sharing overseas if regulators have not classified it as “material data.” These rules came into effect immediately.

What we see is companies stuck in the middle, because the United States has been more involved in business than I remember.

Carlos Gutiérrez

former US Secretary of Commerce

“This is a significant step forward in transparency and our member companies now have much more clarity when seeking to comply with these rules,” said Sean Stein, president of the American Chamber of Commerce in China, in a press release.

“In particular, these changes strengthen the role of industry-specific regulators in determining what data should be considered important in their sectors,” he said, “and also assume that data is not important unless unless they are specifically declared as such.

However, a combination of geopolitical tensions, regulatory uncertainties and slowing economic growth have made it more difficult for foreign companies to operate in China.

“We have companies stuck in the middle, because the United States has been more involved in business than I can remember,” Carlos Gutierrez, former U.S. Commerce Secretary, said Wednesday on CNBC's “Squawk Box Asia.”

“We are in a period of confusion of different ideologies,” Gutierrez said. “We will get through this. Nothing is permanent and the numbers will eventually show that globalization is a better model than self-sufficiency or nationalism. But unfortunately, this is where we are and we will be here for a while. time again.”

Biden, who is running for re-election in November, has issued incentives to spur industrial development in the United States. His administration has also used export controls to prevent U.S. companies from selling advanced semiconductor technologies to China.

…foreign companies share the same lack of confidence and concerns about an uncertain future that is felt in much of China's domestic industry.

Scott Kennedy

Center for Strategic and International Studies

To help foreign companies better navigate the Chinese market, former SwissCham China executive director Peter Bachmann proposed the creation of a dedicated executive based at the company's global headquarters.

“We now have to deal with two different levels. One is the commercial level, and the other is the political level. Before, it was only about the commercial level,” said Bachmann, a longtime Shanghai resident and member of the board of directors of the China Center at the University of Applied Sciences and Arts of North-West Switzerland (FHNW).

He said this argues for a so-called “Chief China Officer”, whose job includes helping the main office better understand China and bridging the gap between headquarters and the leadership team in China .

In search of economic clarity

For companies considering investing in China, the country's near-term growth prospects are another factor.

“The American trade delegation [at CDF] was significantly larger than last year, conference organizers gave them a more visible platform and they took advantage of the opportunity to speak out,” said Scott Kennedy, senior advisor and board chair of Administration for Chinese Business and Economy at the Center for Strategic and International. Study in Washington, DC

“China's party-state has tried to send a clear signal that foreign companies are welcome, but foreign companies share the same lack of trust and concerns about an uncertain future felt in many countries. part of China's national industry,” Kennedy said.

The Chinese government announced at its parliamentary meeting this month that the country would aim for growth of around 5%.

Several analysts said such a target was ambitious given current levels of announced stimulus and the drag caused by the huge real estate sector. Senior government officials indicated at the parliamentary meeting that Beijing could increase its support, but they gave no further details.

This year's China Development Report “offers no new insights into the challenges facing China or the new policy solutions being considered,” said Stephen S. Roach, a senior fellow at Yale's Paul Tsai China Center. Law School.

Instead, the forum focused more on what had already been shared at the parliamentary meeting earlier this month, said Roach, who said he attends the CDF every year except for the first in 2000.

“To me, this looked more like a placeholder for the upcoming third party plenum which could provide a stronger indication of any new political reforms or strategies,” Roach said.

China's ruling Communist Party typically holds a “third plenum” every five years to discuss long-term aspects of the economy. The meeting was widely anticipated since it was scheduled to take place late last year.

Non-US foreign investments

Foreign direct investment in China in 2023 fell to a three-year low, official data showed. Since easing pandemic-era border controls early last year, China has stepped up efforts to attract foreign capital.

The Ministry of Commerce and the city of Beijing held the first “China Investment Summit” on Tuesday, attended by around 140 business representatives.

“Investing in China is investing in the future,” Chinese Vice President Han Zheng said in his opening speech, according to a CNBC translation of his Mandarin remarks. He focused on China's vast market and industrial supply chain, and highlighted how China has worked on issues such as data export and equal market treatment for businesses. foreign.

As U.S. and European companies face greater geopolitical considerations when it comes to operations in China, capital from the Middle East is showing interest in the market.

“When it comes to opportunities for Aramco and China to join hands, the bottom line is that anything is possible!” Amin H. Nasser, chairman and chief executive officer of the Saudi energy giant, said in a speech at the Invest in China Summit on Tuesday.

He highlighted how Aramco and its chemicals subsidiary SABIC struck deals last year for more than $20 billion in investments in China's chemicals sector. Nasser also said venture capital is a “strategic area of ​​collaboration,” and noted that Aramco more than doubled funding for its venture arm in January to $7.5 billion.

Japanese companies are also looking for investment opportunities this year in China's robotics, industrial automation and automobile sectors, said Toyoki Oka, secretary-general of the China-Japan Investment Promotion Agency. , on the edge of the summit. He said these investments would be aimed at sales to China and, eventually, exports to Southeast Asia.

CNBC's Eunice Yoon contributed to this report.

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