Is China really ready to change to attract foreign investment?

China is ready to introduce new rules to break down some of the barriers faced by foreign companies, Premier Li Qiang told global business leaders in Beijing on Sunday.

Addressing the China Development Forum, Li said Beijing will create more opportunities for global investors through macroeconomic policy, urbanization, industrial upgrades, and the transition to a green economy.

“The fundamentals that underpin China’s long-term economic growth remain unchanged,” Li said, emphasizing the prospects for the world’s second-largest economy.

Li said the Chinese government is “carefully studying” some of the issues frequently raised by businesses, including market access, public bidding, and cross-border data flow.
“Some issues have been substantially resolved, while for others we are still working on solutions to ensure a good deal,” he said, two days after China eased security controls for cross-border data transfers.
He also said Beijing will make government services more efficient and protect the rights and legitimate interests of companies of all kinds.
“We are convinced that a more open China will bring more opportunities for win-win cooperation to the world,” he said

Propaganda or reality?

The questions that should arise after this speech are:

• Is this a real opening?
• Why this speech now?

The first point is related to a healthy skepticism about the consistency between politicians’ words and their deeds. Prime Minister Li was addressing foreign investors, so it is obvious that his words were soft toward them.

However, there is the second question: assuming that his words answer a truth, why are they being spoken now? The new government has set economic targets of 5 percent growth, a very high number for a Western government but low for China, which grew 5.2 percent year-on-year in the last quarter of 2023.

Such an opening as Li portends for attracting foreign financing suggests that not everything is going exactly as the Chinese government would like and that, despite some positive signs, the Chinese economy is still in dire straits, to the point where it needs to return to attracting foreign investment to continue growing.

But attracting new foreign companies can happen not only by easing some domestic constraints but also by requiring international political change and normalizing relations with neighbors. We will soon see whether the prime minister’s speech was just propaganda or whether it will have real practical effects.