Beijing Is Desperate for Foreign Money

Commentary

Beijing has learned one thing during the past couple years, even before U.S. President Donald Trump’s election: China’s economy urgently needs foreign investment money and foreign business interests.

For years, it seemed, Beijing acted as if it had all of the advantages. Assuming, not incorrectly, that the foreign interests would tolerate a great deal to gain access to Chinese consumers, businesses, and Chinese markets generally, Beijing made stiff demands of foreigners, imposing layers of red tape on U.S., European, and Japanese companies, refusing to actively enforce patent and copyright infringements, and demanding that every foreign company operating in China have a Chinese partner to which it had to disclose its technological and trade secrets.

Trump’s primary complaints against China in 2018 and 2019 highlighted such practices. The Chinese regime did not change then, but as foreign money has begun to look elsewhere, authorities in Beijing have changed their tune.

This change has become all too evident in the past few weeks. During this rather compressed period, Beijing has announced steps to protect foreign copyrights and patents. In June, it added tax incentives of up to 10 percent for foreign operations that reinvest their profits in China.

Then, in July, seven key agencies in Beijing—including the National Development and Reform Commission, the Ministry of Finance, and the People’s Bank of China—jointly issued what they called a “Notice on Implementing Several Measures to Encourage Reinvestment by Foreign-Invested Enterprises.”

Each of the “several measures” sounds extremely friendly to foreign investment and overseas-based businesses. The new rules now require local governments throughout China to track and support foreign investment and expand the definition of what qualifies for such considerations.

These new rules try to reduce the cost of foreign developments by granting easier access to industrial land, leasing, lease-to-own arrangements, and adjustable-term land transfers.

Regulators have been ordered to simplify and expedite approvals for projects, including those that qualify for the previously announced tax breaks, and do so for a wide range of earnings, including gains from foreign exchange transactions.

Beijing’s new friendliness surely comes in response to the shortfall of foreign investment over the past couple years. In part because of the Chinese regime’s past abusive behavior—but also official hostility to China trade in Washington, the European Union, and Japan—foreign businesses have begun to look away from China. In 2023, China suffered a net outflow of foreign capital. In the first half of 2025, foreign investment was 15.2 percent below 2024’s reduced level.

Strong investment upticks have occurred in e-commerce services, pharmaceuticals, aerospace equipment, and the manufacture of medical devices, but not enough to offset the general decline. The economic drag from these shortfalls has been undeniable, not only in China’s export volumes but also more generally. Beijing has estimated that over the long haul, foreign investment enterprises, as they are called, have contributed between 20 percent and 30 percent of China’s gross domestic product.

Doubtless, recent major concessions will draw some positive response from business in the United States, Europe, Japan, and elsewhere. It is unlikely, however, that foreign business or investment in China will return to what it was when the country was the primary destination for foreign investors.

For one, businesspeople the world over have memories of past abuses and are aware that Beijing’s friendly approach today could easily change back should circumstances allow. They are also aware that a robust response to today’s inducements will raise their exposure to China and make them that much more vulnerable should Beijing change its mind.

Business managers have also become aware in recent years that there are opportunities elsewhere in Asia and Latin America that are, by comparison, more secure than in China. They will no doubt respond with caution.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.